The South African Rand has GBP/ZAR stuck in a range of 19.57 to 20.08
- GBP/ZAR stabilizes at 19.57 after March selloff
- But might struggle to recover well past 8:00 p.m.
- With GBP removed while ZAR remains dynamic
- Fed, BoE and key near-term commodity policy
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The exchange rate between the pound and the rand has stabilized after its massive sell off in early March this week, but with the pound remaining soft and its South African counterpart still buoyant, GBP/ZAR could remain in a rough range of 19.57 to 20.08 for a short while yet.
The South African Rand remained buoyant near the 15.00 level against the Dollar for the first half of the week, while the British Pound itself found balance against the US currency after a week-long decline. , with the net effect causing GBP/ZAR to stabilize near 19.60. level.
A weaker US dollar and a continued rebound in global equity markets may have helped both currencies this week, but the rand has maintained an edge over the pound and many analysts attribute its performance to strong commodity prices. and the attractiveness of South African government bond yields.
“Big commodity exporters were supportive, but South African bond yields also rose, about 50 basis points higher than before the conflict in Eastern Europe and rising commodity prices – 20 % higher year on year in March, but easing over the week. Substantial interest rate hikes continue to be priced in by markets in South Africa, also providing support in the rand,” said Annabel Bishop, Chief Economist at Investec.
Above: Exchange rate between the pound and the rand displayed at daily intervals with Fibonacci retracements of the June 2021 uptrend highlighting possible areas of technical support for the pound. Click on the image to enlarge.
- GBP/ZAR reference rate at publication:
- Main street bank rates (indicative): 18.95-19.09
- Payment specialist rates (indicative): 19.46-19.50
- Find out about specialist rates here
- Set up an exchange rate alert, here
The GBP/ZAR pair fell sharply at the March open as European currencies came under pressure following the conflict in Ukraine, while commodity-related counterparties outperformed as prices rose on concerns regarding the impact that war might have on the supply of certain resources.
But the pound rose tepidly against the rand after appearing to find a footing on Monday and Tuesday at the top of the 78.6% Fibonacci retracement of its June 2021 uptrend, located around 19.57, which could be set to offer a form of technical support to the pound on the coming days.
“We remain cautious regarding this fight against the strength of the ZAR. Global factors and interest rate decisions in the US and UK will be the main events to watch in determining the future strength of the Rand,” he said. said Tim Powell, director of forex at Sable International.
However, much for GBP/ZAR depends on the market’s response to pending Federal Reserve (Fed) and Bank of England (BoE) policy decisions.
“The consensus at present is that the Fed will raise rates by 25 basis points for the first time since 2018, although guidance on the trajectory thereafter is likely to be lacking as recent global developments are cause for concern. and uncertainty. Possible trading range for the rand today: 14,9000 to 15,4000,” says Walter de Wet, fixed income and currency strategist at Nedbank, referring to USD/ZAR.
The Fed is expected to take its first major step on Wednesday to withdraw the stimulus provided to the US and global economies throughout the pandemic, by raising its interest rate, although the dollar and other currencies may be sensitive to its forecasts and directions for the future. Politics.
GBP/ZAR often tends to rise and fall alongside the USD/ZAR rate and could therefore potentially benefit from any market response that lifts the dollar, although the imminent policy decision by the Bank of England is a risk this time. possible decline for the pound and GBP/ZAR.
“GBP’s future direction will likely hinge on whether it fends off hawkish market prices for 2022 rate hikes or instead validates it,” says Shahab Jalinoos, head of FX trading strategy at Credit Suisse, in a note to clients on Wednesday.
Above: The exchange rate between the pound and the rand displayed at daily intervals with Fibonacci retracements of the 2022 downtrend indicating possible areas of technical resistance to any rally in the pound. Click on the image to enlarge.