Firstly, the British economy. Since 2008 and the global recession, the UK is trying to recover. Quantitative easing, spending money on goods and services to try to stimulate supply, has some effect but has not restored the economy to its previous state. The Bank of England loan rate, the proper way to try to stimulate and control the economy, is at a superficial level of 0.5%. This means that money is cheap to borrow, which should help spend it in the marketplace, but also that the pound is not very attractive to foreign investors, only because it does not pay a lot of interest.
However, the UK economy is the second-largest in the European Union, second only to Germany, and the UK is the second-largest exporter of services in the world and the eighth largest exporter of goods. The global economic crisis came after several decades of growth. The trade balance is not very good, with a large trade deficit, but the UK is still such significant power in the world that it seems incredible that Britain will not be able to get out of its current problems.
The economy of South Africa is very different. For example, he suffered from apartheid for a long time, and in practice, there are still many racial problems, even if those times were to end. South Africa is one of the best economies in the African subcontinent, but this does not mean that it works well for all of its citizens. There are still significant differences between the wealthier populations living in large cities and those living in poverty in the country.
From a macroeconomic point of view, South Africa is in an excellent economic position. It is a country rich in natural resources, which includes not only gold and other precious materials but also fossil fuels such as oil and gas. But natural resources accounted for only about a third of the growth over the past ten years, and the rest fell to other industries, such as transport, telecommunications, and manufacturing.
One of the problems is that South Africa depends on its export trade, and, of course, due to the global economic downturn, this has greatly affected its economic growth. Combine this with civil unrest, and you will have an economy with all the components of healthy and growing growth, but with a series of question marks about whether this can happen, as it should be.
Trading the GBP/ZAR spread requires you to look at the basic principles, as well as consider technical analysis to determine market sentiment and find out when you should enter and exit your bets.
When you spread a bet to GBP/ZAR (pound sterling versus South African rand), you have the option to “buy” or “sell” the bet, and it is important that you clearly understand what each bet means. Since Forex bets are always made on two currencies, you should pay attention to which currency is named first. Since the pound is named first in this pair, a bid on a long position or a purchase means that you think that the pound will increase in price, and a bet on a short position or a sale means that it will decline. But since the values are relative, a short bet or a sell bet means you think the South African rand is increasing in price and the long bet is against the South African rand.
For example, the current quote for a daily moving bet is 120 565.1 – 120 765.1. This means that 1 pound can be bought a little more than R 12 in the market. If you think that the pound will rise, you will make a long bet, betting, possibly at £ 50 per point. Since the numbers in this Forex pair are so large, you must be careful not to put too much on the point.
Say that you are right, and the price will rise to 122 863.2 – 123 063.2, you can close your bet on winning. The long rate will continue at a higher price of 120,765.1 and will close at a lower second price of 122,863.2. This means that you won a total of 2098.1 points, the difference between the two prices. Your bet is worth £ 1,049.05.
Of course, your bet could go the wrong way, in which case it would be wise to quickly close the bet before you lose too much. Let’s say the price fell 120,292.1 – 120,492.1 and you closed the bet. Your bet still started at 120,765.1, but this time it ended at 120,292.1, which means you lost 473 points. By multiplying this, you have lost a total of £ 236.50.
Now let’s look at an example of betting on a South African rand to increase value. As mentioned above, this is a short bet on a currency pair. You might bet £ 40 per point, and the bet will continue at the original minimum or selling price of 120 565.1.
Suppose that from time to time the price dropped to 118 362.7 – 118 562.7, and you decided to close the bet and collect your winnings. The difference in the number of points is 120 565.1 minus 118 562.7 since a short bet closes at a higher price. This amounts to £ 2002.40, your profit from the bet.
It is a fact that a fair share of bets does not win. Say, in this case, the quote increased, but not decreased, and you soon encountered a spread quote in the amount of 120 852.6 – 121 052.6, so you closed your bid to minimize your losses. The rate continued at 120 565.1, but this time closed at 121 052.6. The difference in scores is 487.5, which is against you because you bet that the number will decrease. Therefore, at your chosen bet, you lost £ 195.