The GBP/ZAR exchange rate weakened as the South African interest rate decision draws closer.
The Pound to South African Rand (GBP/ZAR) exchange rate continued to strengthen strongly on Wednesday following the release of the Bank of England’s November policy meeting minutes which showed that more policy makers than expected voted in favour of hiking interest rates.
Earlier on Wednesday the South African Rand (ZAR) exchange rate advanced against the Pound (GBP) exchange rate after data showed that inflation rose more than forecast in the African nation. The currency pair is likely to see movement when the Bank of England releases its latest policy meeting minutes.
On Tuesday the Pound to South African Rand (GBP/ZAR) exchange rate climbed due to the Office for National Statistics (ONS) released the latest UK inflation data. The currency pair is forecast to remain soft however as economists continued to bet that UK interest rates will not rise until late 2015. As the session progressed the currency pair softened.
The ONS data showed that inflation in the UK increased unexpectedly in October as UK consumers geared up for the Christmas holidays and spent more on toys and video games.
According to the report, the rate of consumer growth increased from 1.2% to 1.3%, beating economist forecasts for an unchanged figure of 1.2%.
Despite the improvement investors were not convinced that the rise was not just a blip.
Sterling remains restrained despite the better than expected figure as investors remain cautious after Bank of England Governor Mark Carney warned last week that the UK is coming under disinflationary pressures from the Eurozone.
The BoE inflation report also warned that inflation could dip below 1% over the coming six weeks.
The pickup in inflation is also forecast to e temporary as the report also showed that input prices at UK factories tumbled by 8% on an annual basis and imported food goods fell by a record 9.1%.
‘It is almost certain that November’s number is lower than October’s and could easily hit 1%, triggering a letter from BoE governor Carney to Chancellor George Osborne to explain why. Of course, the increase now wipes out last week’s wage improvement and tightens pressure on pockets heading into Christmas. Retailers will continue to cut prices heading into the festive period, until decent wage strength allows their margins some breathing room,’ said Chief economist at World First Jeremy Cook.
The South African Rand meanwhile is holding steady against the US Dollar and other peers as Rand traders wait for direction from abroad.
Economists will now be looking ahead to Wednesday’s South African inflation data and Thursdays Reserve Bank of South Africa interest rate decision.
