Portfolio

FX roundup: Sterling flops on major crosses and embattled Zuma sparks rand rally

By Andrew Schonberg

Date: Monday 28 Nov 2016

FX roundup: Sterling flops on major crosses and embattled Zuma sparks rand rally

(ShareCast News) - It was a case of the thin red line for sterling on Monday as traders executed retreats for the UK currency on major crosses, with South Africa's rand zipping ahead on reports president Jacob Zuma is facing a no-confidence vote.
At about 17:06 GMT, sterling was down 0.54% to $1.2409, and down 0.38% to €1.1735. The dollar-spot index was down 0.07% to $101.420.

Michael Hewson, chief market analyst at CMC Markets UK, penned sterling's performance as overall disappointing.

This was despite OECD revising its growth forecast for the UK economy slightly higher, although, he said, it "still remains at the lower end of expectations and behind its EU and US peers."

Chris Saint, senior analyst at HL Currency Service, noted a heavy week ahead on the economic data front, much of which will have relevance to sterling's performance, and the euro's too.

Sterling was also heavily lower versus the emerging market currencies of Australia, Canada and New Zealand, and was markedly down against South Africa's rand.

South Africa president Jacob Zuma is facing a vote of no confidence from leaders of the ANC political party to which Zuma belongs.

Zuma has survived several parliamentary votes in the past, but this this the first time the ANC will formally discuss his position, the BBC reported.

This news was received as a positive for South Africa's currency. At about 17:06 GMT, sterling was down 3.06% to 17.0653 rand, while the dollar was down 2.53% to 13.7531 rand.

Barring a 0.18% gain to €0.9457, the dollar was down firmly on other key crosses, apparently taking a breather after hitting 13-year highs last week, as investors booked some profits.

Overall, noted Hewson, the greenback had a rather mixed day, dropping sharply against the yen, but gaining ground against the pound, while the Canadian dollar has been pulled around by the movement in the oil price.

FXTM Research analyst Lukman Otunuga added that the US issue had retraced from gravity-defying levels as investors booked profits ahead of the data-packed week ahead, which could reinforce the firm expectations of the Fed raising US rates in December.

"Sentiment remains firmly bullish towards the dollar with any depreciation seen as a correction for bulls to propel the greenback even higher," he opined.

"Much attention may be directed towards the pending third-quarter GDP release and November's non-farm payrolls, which could provide a clearer picture of how the world's largest economy is faring."

Otunuga added that a solid GDP and rising employment may be critical chess pieces to solidify the already firm expectations of a December US rate increase."

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