South African Rand Forecast to Decline Against the Pound this Week, GBP/ZAR Could Rise to 16.85
The Pound to South African Rand exchange rate (GBP/ZAR) is in a long-term downtrend as reflected by the fact that it is still trading under a major trendline.
It is now in what could be described as a mini-downtrend within that broader trend and this recently made new lows at 16.02 on the 15th of June.
Since then it has recovered, however, and is currently trading at 16.40.
The look and feel of the most recent recovery price action suggests the current move up has not yet finished.
Notwithstanding the bearish milieu, we see the possibility of a continuation higher to the level of the 50 and 200-day MA’s in the late 16.80s.
More specifically, a break above the 16.70 highs would confirm such a continuation up to a target at 16.85.
After that, however, the more dominant bearish broader trends are likely to reassert themselves and push the exchange rate lower again.
Data and Events for the South African Rand
The South African Rand recently weakened marginally after the Public Protector Busisiwe Mkhwebane advised that the South African Reserve Bank (SARB) should change its primary objective from “protecting the value of the currency in the interests of balanced and sustainable growth,” to simply facilitating, “balanced and sustainable growth and socio-economic wellbeing for its citizens,” without the reference to the currency
The SARB is fighting these attempts to change its policy remit and it will probably be difficult for Mkhwebane to get the changes she wants enforced, and partly as a result, the Rand has not fallen as much as expected.
“Yesterday’s mild foreign selling of local assets, combined with the measured losses in both the rand and bonds, shows that markets are not panicking,” said John Cairns of Rand Merchant Bank (RMB).
As far as the week ahead goes, the main data release, will be the Trade Balance for May, which will be released at 13.00 on Friday, June 30, and is expected to show a rise of 10.6bn in the surplus from 5.1bn previously.
Factory Gate price inflation, or PPI as it is called, is released on Thursday at 10.30 and is forecast to show a rise of 0.4% in May from the previous month and 4.7% compared to May of last year.
Politics Central for Pound this Week
On the agenda for Sterling this week:
- Ongoing debate around of Brexit negotiations
- The Government’s alliance with the DUP to allow it to govern
- The debate on the Queen’s Speech, with a vote expected on Thursday
- The government is also expected to present details of proposals on rights for EU citizens after Brexit on Monday.
One of the main events for Sterling in the week ahead is the voting of parliament on the Queen’s speech, which is to be held on Thursday 29.
The event should pass by without little hitch though owing to the successful signing of a pact between the DUP and Conservative parties.
In exchange for a number of key policy pledges and spending, the DUP will support the Government's agenda in Parliament.
This will allow May to Govern effectively and removes a key piece of uncertainty in the UK political sphere. .
The only other events of any note is Bank of England Governor Mark Carney's appearances on Tuesday at 11.00 BST and Wednesday 14.30 at the ECB's central banker's forum.
Markets will be looking for any hints that he supports raising interest rates in the UK, as does the Bank's Chief Economist Andy Haldane.
The Pound dropped last week when Carney said he would not support a rate rise only to rally the following day when Haldane said he would support such a move.
If those looking to raise rates win the argument, we would see another pillar underneath Sterling fall in place.
