SA Rates work well for the UK Pound

So the weaker Rand against the pound - thats interesting.

Sterling has managed a stellar recovery against a very weak Rand since New Year.

The 9% rally in the exchange rate has been prompted by a general shift in investor risk appetite.

The high yielding currencies had been doing well in Q4, and the Rand enjoyed the same kudos as the Aussie dollar even while the South African Reserve Bank are in rate cutting mode.

A slide in the gold price (which came off its $1,430 per ounce peak over New Year and now trades around 6% lower at $1,336) impacted sentiment toward the high yielders, and as we know well from experience over recent years, these currencies tend to rise steadily and then suffer sharp setbacks when investors sense trouble.

The so called "carry trade" has been largely responsible for the inexorable rise in the Aussie dollar and Rand, and when traders unwind these positions the currencies come under short term selling pressure. A carry trade is where investors borrow in a low interest rate currency and change the money for higher yielding currencies. The bet works well as long as the high yielding currency rises. A fall in the high yield currency can cause a stampede as traders head for the exit. That's what we've seen over the last few weeks in the Rand.



In the UK inflation and interest rates were the dominant theme last week after news that the Consumer Prices Index rose to 3.7% in December, well ahead of the forecasted 3.4% rise. Retail prices (which include a wider basket of goods including housing costs) rose to 4.8%. The inflation figures prompted traders to consider the possibility of interest hikes sooner than previously expected. Then we heard this week that fourth quarter GDP growth was - 0.5%, which makes any notion of a near term rate hike extremely unlikely as the economy flirts with recession. Bank of England governor Mervyn King added weight to the case for no rate hikes when he commented that any rise in rates would not be helpful.


South African consumer prices rose 3.5% in December, giving the central bank plenty of scope to keep interest rates on hold at 5.5% at last Thursday's policy meeting. The last change in the bank's benchmark rate was a cut on November 19th from 6%.


The technical outlook is still precarious for Sterling. We've seen these sharp rallies dissipate all too often over the last few years as investors invariably head back into higher yielding assets. The market has found resistance around the 11.27 level, which marked the high back in November. If Sterling could manage a daily close above there it would open the way to our next key resistance level at 11.75. Buyers of the Rand should strongly consider covering any requirement now, locking in the 9% gain we've seen over the last 3 weeks. This has been the sharpest rally since November 2009.






Market Analysis by Jon Beddell thanks Mate!!

Money money money!!

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But sometimes, when we want something, but don't have the money, we have to get a loan. Whether it's  personal loans, a home loan or even a loan to cover that Ferrari of yours.


Some people believe that money makes the world go round, some believe that money leads to success, leads to happiness. But I've got news for you, my friend...


The road in life begins with happiness. If you're not happy without money, how will you ever be happy with it? Something for you to think about for the remainder of the day;)

Inflation jumps in the UK - Now 3.7% eeeeeish!!

So now we seeing UK inflation jumping at least 0.3% more than expected by analysts.

The Pound rallied above 1.60 against the U.S Dollar for the first time this year, while the UK currency also jumped 0.4% higher versus the Euro, after a report from the Office of National Statistics showed that UK inflation accelerated much more than initial forecasts.

Consumer prices rose 3.7% from a year earlier, despite expectations of a more modest increase to 3.4%.



Inflation has remained stubbornly above the government's 3% limit for ten months in a row and will probably accelerate further with the recent increase in VAT. The increase in prices within the UK means that the pressure is growing on the Bank of England to begin raising interest rates from a record low of 0.5%. Will this happen...well it would be interesting see what kind of gumption they have.


The BoE face a difficult balancing act in tempering rising inflation against weak economic growth. Speculation of an interest rate increase over the coming months is supporting the Pound and we may see a sustained move higher over the coming days.


The Bank of England have adopted a wait-and-see approach for the past year, but the MPC is losing some credibility for allowing inflation to remain above the government's upper limit of 3%.



Thanks to the Market Analysis by Adam Solomon from TORFX.