well time to buy some pounds me mates!!!
Sterling is still on the back foot here, failing to make any convincing breaks above the 11.75 resistance zone.
We've been up to that level three times in the last three months, and failed on every occasion. Things looked a little better on Friday after the Pound shot out of the blocks on unexpectedly strong GDP figures. Growth in the second quarter came in at 1.1% compared to the 0.6% expected.
That's good news by any measure, and helped to back up the positive retail sales data released the previous day. The problem is, all this supposed good news is adding weight to the case for a general global recovery, which in turn prompts investors to buy the higher yielding currencies like the Rand. Sterling does benefit from strong domestic data, but when everything settles down the high yielders tend to come out on top. The results of the European bank stress tests were also released on Friday, showing that only seven regional banks failed to make the cut. All UK banks passed. Again, more evidence that the world economy is finding its feet. The Rand rallied yesterday as speculation grew that HSBC would acquire South African firm Nedbank. The deal would require the purchase of a significant tranche of South African Rand, which helped the currency tick higher against other units.
In other news, the South African central bank kept interest rates unchanged at 6.5% last week. The last change was on March 25th when they cut rates by 0.5%. Analysts expect them to remain on hold for some time to come.
The technical outlook is negative. The UK has recoiled from the 11.75 level and now look set to sell off back to the 11.05 level that marked the late June low.
Buyers of the Rand should consider hedging any exposure now.
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