The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is trending within a tight range on Tuesday afternoon.
After British consumer prices fell to a record-equalling low, the Pound cooled versus all 16 of its most traded currency competitors. Although the inflationary decline is likely to cause a delay to rate revisions, the positives for UK citizens should see improvement in wages and purchasing power.
The South African Rand, meanwhile, is trending higher versus many of its peers as a result of gold prices rising to the highest in almost 12 weeks as futures traders temper bets as to the timing of a Federal Reserve rate hike.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is currently trending in the region of 17.4630.
Pound Sterling (GBP) Exchange Rate Softens on Consumer Prices
In the wake of very disappointing British inflationary data, the Pound softened against all 16 of its major peers. This is due to easing pressure on the Bank of England (BoE) to tighten monetary policy. However, despite the inflationary downturn weighing on the Pound initially, it could spell good news for British consumers as the oil price decline acts like a tax cut.
The Pound is already showing signs of recovery as many economists feel the initial Sterling downtrend was overdone thanks to exaggerations as to the affect of falling inflation.
‘Concerns over deflation pressures are grossly exaggerated and risk undermining business confidence. And these figures show that inflation in the services sector – which accounts for some 80% of the UK economy – remains persistently above 2%. The main factor which counts for the low level of goods inflation, the fall in energy and goods prices, is positive as it boosts consumers’ disposable income and makes it easier for businesses to devote resources to investment,’ stated Chief Economist David Kern.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate dropped to a low today of 17.3120.
South African Rand (ZAR) Exchange Rate Gains on Gold Prices
After having cooled significantly amid speculation that the Federal Reserve will raise rates soon, gold prices rebounded on Tuesday. This is because futures traders are speculating that the Fed will delay a rate rise until labour market data improves.
‘The longer-term direction for gold will still come from the outlook for US interest rates,’ said Zou Lihu, commodity analyst. ‘The short-term direction of gold is being driven by the dollar, oil and general risk sentiment in the market.’
Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast to Strengthen
Although the initial Sterling declination was significant following the CPI data, the fact that the core inflation rate remained positive is likely to aid a slight recovery for the Pound. Additionally, many economists are stating that the adverse affect of low inflation is exaggerated. Therefore, the Pound Sterling to South African Rand (GBP/ZAR) is likely to strengthen from its current position.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate climbed to a high today of 17.4840.
