Pound Sterling (GBP) to South African Rand (ZAR) Exchange Rate Fluctuating

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate attempted to recover on Tuesday due to a so-called ‘fat finger trade’. However, Rand investors remained focused on the risky Rand ahead of Wednesday’s key South African session.

GBP/ZAR dipped to a fresh one-month-low of 21.4985 on Monday as investors reacted to the latest ‘Brexit’ polls. At the time of writing however, the pair was up around 0.5% and trended in the region of 21.6350.

Pound (GBP) Recovers on ‘Fat Finger Trade’ After Monday Bearishness

The Pound plummeted across the board on Monday as investors reacted to a new set of polls released since last week’s session.

A trio of polls, including an Opinium poll from The Guardian, an ICM poll and a YouGov poll, all indicated what many Pound investors were fearing – an increase in support for the ‘Leave’ campaign.

This marked the second consecutive week the ‘Leave’ campaign had strengthened, with many analysts citing an increased immigration rhetoric as a reason for the camp’s newfound support.

Sterling’s volatility surged following the news, with investors selling the Pound in droves due to the currency’s increasingly uncertain future in the global exchange market.

However, the Pound experienced an unexpected recovery on Tuesday. Many analysts expect that the Pound experienced what is called a ‘fat-finger trade’ during the Asian trade session. Business Insider UK reports;

‘Market consensus seems to be that the move was caused by a fat finger trade, whereby a trader punches in a transaction incorrectly which can in turn trigger automatic orders, known as stops, to sell or buy currencies. A trader from one City of London trading firm confirmed to Business Insider that they believe the trade was a 'fat finger' mistake. It is currently unclear by whom the error was made.

In normal trading hours, given how liquid the GBP market is, it is unlikely that a single mistake would move the market so massively, but in Asian trade, liquidity is substantially lower, which makes triggering a stop far easier.’

Rand (ZAR) Investors Adjust Ahead of Wednesday’s Key Session

The South African Rand strengthened across the board on Monday, as investors who missed out on Friday’s Rand trade reacted to news that the Standard & Poor’s South African credit rating would remain above ‘junk’ status.

The Rand had recently felt pressure as many economists feared that South Africa’s credit rating could be downgraded due to ongoing political strife in the nation. This could have affected the nation’s standing in the global economy.

However, the Rand’s bullishness slowed on Tuesday as investors began to readjust their positions on the currency ahead of Wednesday’s key South African session. A credit rating review from Fitch is expected, as well as the latest Gross Domestic Product (GDP) report. IOL reports;

‘Analysts expect Fitch to affirm South Africa's investment grade credit rating but lower its outlook to negative.

Fitch, which rates South Africa one step above speculative grade with a stable outlook, has not said when it will publish its review. The Treasury says it expects the review on June 8.’

Despite this, solid risk-sentiment due to disappointment in the US Federal Reserve, as well as optimistic commodity data, saw the risk-correlated Rand preventing too many losses.

Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast: South African GDP Ahead

Wednesday looks to be a vital session for the Rand, with Q1 Gross Domestic Product (GDP) due for release. The South African Treasury also expects that Fitch will update its South African credit rating, concerning investors.

South African growth is expected to slip from 0.4% to 0.1% quarter-on-quarter, and from 0.6% to 0.4% year-on-year. As these expected drops have already disappointed investors, a worse score could send the Rand plummeting.

The Rand’s levels would also take a hit if Fitch releases a worse-than-expected South African outlook.

The Pound, on the other hand, has the potential to slip against the Rand if investors indulge in profit-taking or corrective trading from the ‘fat finger trade’ on Tuesday morning.

Wednesday sees the release of relatively influential UK data. Manufacturing and industrial production reports are expected to show that production worsened in all prints, which could weigh on the Pound.

NIESR is also expected to release its latest growth estimate for May, which could bolster the Pound’s recovery if it prints optimistically but could see the Pound fall if it predicts near-stagnation.

As always, GBP/ZAR is sensitive to both ongoing ‘Brexit’ debates as well as shifts in risk-sentiment. If EU Referendum rows result in a shift of sentiment towards ‘Remain’ the Pound could recover, but an increase in ‘Leave’ chances would have the opposite effect.

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate currently trades at around 21.6350, while the South African Rand to Pound Sterling (ZAR/GBP) exchange rate trends in the region of 0.04600.