Pound to Rand Exchange Rate Outlook - GBP/ZAR Declines Further Today

August 12, 2014 - Written by Ben Hughes

STORY LINK Pound to Rand Exchange Rate Outlook - GBP/ZAR Declines Further Today

Despite Tuesday's gains, the British Pound to Rand exchange rate (GBP/ZAR) saw significant losses on Wednesday. The GBP ZAR today (Thursday) sits at 17.59786, 0.31 per cent lower compared to yesterday's close.

Previously, the forex market had been cautious after news broke that the UK has dispatched a number of Royal Air force Tornado fighter jets to Cyprus where they launch surveillance missions to aid with delivering supplies to stranded refugees in Iraq.

Calls are mounting for Prime Minister David Cameron to recall Parliament to discuss the British response to the Islamist threat.

Last week the United States began to launch airstrikes against IS positions and calls are growing for more sustained offensive action against the brutal Islamist regime.

Islamic State fighters have seized territory across Iraq and Syria in the past few months, as well as continuing reports of the slaughter of Iraqi religious minority groups. Among those reportedly being targeted by the jihadists are Iraqi Christians and members of the Yazidi sect.

Tory armed forces minister Andrew Robathan said; ‘"There can be no real help for the people of Iraq that are threatened by IS without stopping its advance. That is what anybody who is worried about the humanitarian situation has to admit. We have to realise it is no good just sending aid. The real solution is to stop these people and hopefully allow the Iraqis and the Kurds to defeat them.

‘There are many ways one could use military strikes – air strikes or the use of drones can be done surgically without putting troops on the ground. We had our fingers pretty badly burnt in Iraq, as did the Americans. There is no appetite to have proper troops on the ground.
However, the idea of a few observers perhaps directing air operations is a slightly different matter.’

The South African Rand exchange rate (ZAR) was unlikely to make much movement on Tuesday due to a lack of domestic market moving economic data releases. It managed to briefly regain some ground against the Pound after a report showed that UK food sales fell to a multi-year low but any advantage created was soon lost as the markets focused on geopolitical issues.

‘Looking ahead, we would expect the South African Rand to continue taking its cue from global risk appetite, which implies that if geopolitical risks continue to ease, then further Rand strength could be expected ahead of tomorrow’s local and US retail sales data. We think that the risk lies in a subdued local retail sales print and an upbeat IS print which will collectively be Rand negative,’ said Barclays.

Also weighing on the Rand was the far worse than expected ZEW economic sentiment data out of Germany and the wider Eurozone. Investor confidence in the Eurozone’s largest economy plummeted to its lowest level since 2012 and the height of the Euro crisis. As Europe is one of South Africa’s biggest trading partner any weakness in the Eurozone often has a negative impact upon the Rand.

Pound to South African Rand (GBP?ZAR) Exchange Rate Forecast

The South African Rand (ZAR) remained weaker against the Pound Sterling (GBP) and other major peers on Tuesday as geopolitical concerns continued to weigh upon the currency.

The Rand is likely to weaken further later in the session as the latest retail sales and mining production data reports are both expected to disappoint.

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