The Pound Sterling to South African Rand (GBP/ZAR) exchange rate staged an impressive comeback on Wednesday, advancing by more than 0.5% due to concerning developments in South Africa and surprising Bank of England meeting minutes.
Early into the local session the Rand posted widespread losses in response to the news that Moody’s Investors Service (one of the world’s top three ratings agencies) slashed the local-currency ratings of South Africa’s largest banks.
Absa Bank Ltd. Nedbank, Standard and FirstRand all has their local-currency deposit ratings cut to the third-lowest investment grade.
While the South African Reserve Bank has since asserted that it disagrees with the decision, Moody’s argued that the central bank isn’t willing to offer full protection to creditors in the event of a banking collapse and that ‘This needs to be reflected in Moody’s ratings, as debt ratings speak to both the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default’.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate hit a low of 17.6480.
The Rand accordingly slumped against the Pound and hit a one-week low against the US Dollar, prompting this response from one locally-based currency strategist; ‘Last night’s Rand jump seems a bit extreme. Mostly a Moody reaction rather than being an able reflection on what’s going on, so some pullback is possible this morning. Still the trend on Dollar/Rand is clearly towards the upside on the 10.50 – 10.80 narrow range.’
As trading progressed the Pound Sterling to Rand exchange rate also fluctuated in response to South Africa’s inflation data.
The report showed that the pace of annual inflation slowed from 6.6% in June to 6.3% in July.
A reading of 6.4% had been anticipated.
On a month-on-month basis, prices were up 0.8%.
Inflation continues to run well above the South African Reserve Bank’s target levels.
Another main reason for the Pound’s impressive performance against the Rand is that the minutes from the latest BoE meeting showed that 2 members of the Monetary Policy Committee voted in favour of increasing interest rates now.
Sterling broadly strengthened as the news that both Martin Weale and Ian McCafferty voted to increase the benchmark interest rate by 25 basis points upped the odds of borrowing costs being increased this side of Christmas.
GBP to ZAR Exchange Rate Forecast
The Pound Sterling to Rand exchange rate is likely to hold today’s gains into Thursday.
There are no other notable South African economic reports due for release this week, although investors will be looking ahead to next week’s domestic growth figures.
Additional gains in the GBP to ZAR pairing could occur if the UK’s retail sales data comes in at or above expected levels.
Economists have forecast a month-on-month sales gain of 0.4%.
The Pound Sterling to South African Rand exchange rate hit a high of 17.7980.
GBP to ZAR Exchange Rate Softens Fractionally after Slowing UK Retail Sales
The Pound Sterling to South African Rand has softened slightly today following the release of the UK Retail Sales data.
Whilst July showed better-than-forecast retail sales growth the positivity was micrified by the yearly figure. Year-on-year Retail Sales were forecast to grow by 3.5%; slightly less than the previous figure of 3.8%. The actual data showed that growth had slowed to only 3.4%. The result is that the Pound has fallen a little versus most of its major peers. The fractional declination could be accelerated later in the session as traders digest the impact of slow retail sales growth. However, it is still possible that the positive hawkish Bank of England minutes yesterday will go some way towards damage limitation.
With no South African domestic data to be released today expect any change to be dictated by foreign currency movement. As the US Dollar continues to surge; emerging currencies, such as the Rand, are likely to soften as ‘Greenback’ (USD) demand heightens.
South African Rand (ZAR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,South African Rand,17.7858,
Euro,,South African Rand,14.1951,
US Dollar,,South African Rand,10.6826,
Australian Dollar,,South African Rand,9.9117,
New Zealand Dollar,,South African Rand,8.9508,
Canadian Dollar,,South African Rand,9.7253,
[/table]
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