Despite British inflation data proving to be less-than-ideal the Pound is making gradual gains against the South African Rand. Having had nothing by way of South African domestic data on Tuesday the Rand has softened as traders await Wednesday’s inflation data.
The Pound Sterling to South African Rand exchange rate is currently trending in the region of 17.7660.
Sterling has had a difficult journey of late with the burden of the Scottish bid for independence dragging its heels. Confusing polls with varied results has made it increasingly difficult to predict the outcome; so traders have generally shied away from the Pound as a risk aversion tactic. With the referendum drawing ever closer there is a very high likelihood that the Pound will continue to trend lower against most of the majors.
The South African Rand has struggled to make any meaningful gains since last Thursday when domestic data indicated a declination in mining and manufacturing production. The Rand has also felt the heavy blows from the outstretched arms of a bullish US Dollar which has dominated the currency market for the past few weeks.
The Pound Sterling to South African Rand has hit a low today of 17.6420.
Tuesday’s British economic data looks positive at first sight but this would be a misinterpretation. Despite having met with the market consensus of 1.5%, the Consumer Price Index declined from the previous figure of 1.6%. The Bank of England has set their inflation target at 2.0%, so the fact that the recent data shows the rate to have moved away from the target has not been well received.
Those invested in the Pound, however, will have been pleased with the Core Consumer Price Index which rose to 1.9% despite having been forecast to maintain the previous figure of 1.8%.
With an absence of South African domestic data on Tuesday the Rand has been subject to foreign currency volatility. The gradual gains it has made against the Pound could be attributed to softer US Dollar demand ahead of the Federal Reserve interest rate decision. The pressure on the Fed to hike rates has increased exponentially over the past few weeks as the US Dollar has topped the currency charts. With labour market data seemingly suggesting that the Fed is in a position to harden their stance on monetary policy, a dovish outlook could spell disaster for the American currency but the South African Rand would benefit from the demise.
The Pound Sterling to South African Rand exchange rate has reached a high today of 17.8300.
UPDATE
The Pound Sterling to South African Rand exchange rate is currently trending in the region of 17.8160.
At the beginning of the European session on Wednesday the South African Rand strengthened against the Pound after African inflation data highlighted the possibility of an interest rate hike. The data indicated that the African inflation rate has been steadily rising and is above the target 6%. Economists have speculated that in order to counteract the rise of inflation they will raise their benchmark rate.
The Pound has rallied against the South African Rand on Wednesday morning after British economic data was generally positive. The Bank of England minutes revealed that two of the policymakers had dissented from Governor Mark Carney’s stance on monetary policy. This has heightened speculation of a near-future interest rate hike. British labour market data was mostly positive, although this may not be enough to help the Pound sustain the gains it has made with the Scottish referendum still dominating trader focus.
