Pound Falters against South African Rand as ZAR Extends Rally
The Pound (GBP) is down some 0.5% today against the South African Rand (ZAR), extending its losses following an interest rate move by the US Federal Reserve yesterday.
This depreciation comes following a turnaround in the fortunes of several emerging market currencies caused by China vowing to stimulate its economy, lessening the fears of any ramifications from a global trade war.
Markets had already priced in the 0.25% rate hike for the Federal Reserve yesterday evening, so the knock on effect on ZAR was limited.
GBP/ZAR Faces Downside Pressure as SA Inflation Rates Hold Up
The latest Producer Price Index (PPI) data to be released has indicated that inflationary pressures remain strong in the South African economy, with the M-o-M figure for August coming in at 0.6% and the Y-o-Y figure printing at 6.3%.
These both either matched or beat previous figures and expectations, with the South African Reserve Bank (SARB) recently ascribing higher rates on inflation to a weakened currency and higher oil prices.
With South Africa having fallen into a recession, any chance of the SARB attempting to curb inflation by raising interest rates further runs the risk of prolonging the recession.
South African Rand to Pound (ZAR/GBP) Exchange Rate Movement Limited by US Dollar Strength
The South African Rand (ZAR) has been rising steady against the Pound (GBP) today, with the US rate hike having only limited effect on curtailing Rand demand.
The Federal Reserve boosted interest rates from 2% to 2.25%, which has sent the US Dollar rallying.
In turn, this has reduced the appeal of both the Rand and the Pound, with the forward guidance notes accompanying the rate decision indicating a hawkish lack of ‘accommodative measures’ in coming months.
Pound South African Rand (GBP/ZAR) Outlook: Consumer Confidence Stats could Boost GBP/ZAR
The South African Rand is likely to come under pressure on Friday morning when the Q3 consumer confidence reading is published.
The figure is tipped to show a reduction in sentiment levels during the third quarter, which could worsen the Rand to Euro exchange rate ahead of the weekend.
On the GBP side of the pairing, a speech by Bank of England Governor Mark Carney could help the Pound claw back some of its losses this afternoon if he sounds upbeat about a near-term interest rise.
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