The Pound has made a surprise 0.8% rally against the South African Rand on the afternoon of 15th March.
This appreciation late in the day is mainly down to high risk sentiment driving up demand for ‘safe haven’ currencies like the Pound.
Sterling has also been supported slightly by news that International Trade Secretary Liam Fox has met his US counterpart in Washington.
Although a UK exemption from incoming US metal tariffs is not guaranteed, Pound traders have still jumped to positive conclusions from the talks.
(First published 14th March, 2018)
Upcoming UK Inflation Rate Data could Spark Pound to Rand Exchange Rate Rally
The Pound has traded in a narrow range against the South African Rand on 14th March, but next week may see Sterling rise sharply in the GBP/ZAR pairing.
Sterling has recently fluctuated because of the 2018 spring statement, which has provided a mixed forecast for UK economic growth.
After economists and analysts have processed the contents of the statement, the next source of interest will be UK inflation rate data out on 20th March.
Estimates are for a year-on-year slowdown in base inflation, in addition to a yearly dip in the core inflation rate.
This outcome would tie into Office for Budget Responsibility (OBR) forecasts for inflation to fall to the Bank of England’s (BoE) 2% target by 2019.
If inflation does decline then the Pound to South African Rand exchange rate could conversely rise.
Although lower inflation would reduce the pressure on the BoE to consider higher interest rates, it would also remove some of the strain on UK consumers.
If inflation falls below the pace of wage growth, UK GDP could start to rise as investment and spending levels creep up.
Next BoE Interest Rate Decision could Trigger GBP/ZAR Exchange Rate Turbulence
After the UK inflation rate data comes out next week, the Pound could next be moved by the BoE’s interest rate decision meeting, held on 22nd March.
Policymakers at the UK central bank aren’t expected to adjust interest rates, but could still influence the Pound if they respond to the spring statement’s forecasts.
Economic projections were broadly positive, so if the BoE predicts a similar or better UK economic performance in 2018 then the GBP/ZAR exchange rate could rise.
Additionally, if BoE policymakers give any indication that they may be considering higher interest rates in the coming months then the Pound could also advance.
South African Economic Forecast: Rand to Pound Exchange Rate (ZAR/GBP) could Rise on Mining Data
The Rand has advanced against the Pound (ZAR/GBP) on 14th March thanks to the South African Q1 business confidence index, which has risen from 34 points to 45.
Moving to a different sector, the Rand could rise further against the Pound on 15th March when South African mining statistics are released.
Gold and mining production levels for January will be revealed; current forecasts are for rising levels of output across the board.
South Africa has a heavy reliance on exporting metals, so if production levels increase then the Rand could rise on positive expectations about continued activity.
Although demand for South African iron ore could be reduced by US plans to impose steel tariffs, there is still believed to be sufficient global demand to mitigate any losses.
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