SA Rand vs Pound Sterling Outlook: Where Next for GBP/ZAR Exchange Rate?

The British pound to South African Rand (GBP/ZAR) exchange rate pairing could well be stuck in a sideways move for the remainder of 2014.

However, as we have noted in an earlier piece, the outlook for the South African Rand looks negative as we head into 2015.

Despite the longer-term picture looking GBP-positive, we believe it will take some time before the next phase of the GBP/ZAR rally higher is able to kick in.

Untile then trade could well be defined by a sideways rangebound trade.

• For reference, at the time of writing the pound to South African rand exchange rate (GBP/ZAR) is 0.84 pct higher on a day-to-day basis at 17.8227.
• The US dollar to Rand exchange rate (USD/ZAR) is 1.16 pct higher at 11.1708.
• The euro to South African Rand exchange rate (EUR/ZAR) is 0.49 pct higher at 13.9250.

Ensure you get your ideal rate and don't get stymied by adverse market moves, find out how.

Be aware: The above quotes are taken from the global currency spot market. It must be noted that your bank will widen the spread on the above numbers when passing on their retail rate to customers. An independent currency provider will however guarantee to undercut the bank's offer thus delivering you more forex. Please see more on this here.

Sideways Motion for GBP/ZAR Forecast to Dominated Proceedings

The outlook for the sterling / rand is currently dictated by the resistance zone found just north of 18.5870 - as long as a break of this level is not sustained we would suggest that reversions back into the 17.50's is possible.

Indeed, 17.50 acts as a pivot level below which the GBP/ZAR will likely run lower towards support located just above 17.1600.

The clearest message offered by the charts at the present time is that a break below 17.000 remains remote.

We feel that, ultimately, further gains in GBP/ZAR are due in 2015, particularly as the Bank of England are expected to start ramping up their base interest rate from historical lows.

This will eat into the yield advantage South Africa has enjoyed for some time ensuring demand for ZAR slides.

South Africa's Rand Declines

Below-par Chinese data has ensured the South African unit has started the new week on the back-foot against both sterling and the US dollar.

ZAR fell as far back as 11.0855 vs the USD, a level last touched on Oct. 20, as data from China signalled that demand for exports from the world's second-largest economy, and a key trade partner for South Africa, was likely to decrease.

The rand is expected to remain under pressure this week after state-owned power utility Eskom instituted rolling black-outs over the weekend and said on Monday that electricity supply would be stretched.

John Cairns of Rand Merchant Bank tells us ZAR is yet to feel the impact:

"It doesn't seem to have had much of an impact on the rand so far but there are a lot of people worried about it, it could come into market focus as the week progresses."

Forex Market Action Sees Euro Under Pressure

EURUSD fell sharply at the open to 1.2440 due to technical trading strategies getting triggered on the break of 1.2500.

But EURUSD was able to regain most of the early loses to 1.2492 (however demand feels weak).

USDJPY was range-bound between 112.60 and 112.99, unable to break upside resistance.

AUDUSD fell to 0.8702 following the China PMI and soft Australian building approval reports.

In FX EM, the trend was the same, with USD gaining broadly. In Asia KRW and MYR were the big underperformers while traders will be focused on RUB when Europe opens.

Asian equity markets are undecided on risk sentiment. The Nikkei closed while the Hang Seng fell -0.41% and Shanghai rose 0.40%. S&P futures are slightly in the red by 0.2%.