Today’s Pound to South African Rand losses have worsened, with the GBP/ZAR exchange rate falling by -2.2% during the afternoon.
This continued weakening of Sterling comes after further consideration of the Bank of England’s (BoE) forward guidance plans.
These are semi-specific hints about when there could be monetary policy adjustment, but are often subject to change.
Theorising that the latest interest rate freeze might cause doubt about future projections, Reuters Columnist Jamie McGeever said;
‘If, and when, the Bank is ready to pull the trigger on rates again, it will have a tough task convincing markets it will follow through.’
(Last updated 10th May, 2018)
GBP/ZAR Exchange Rate Recovery Possible on Supportive Data after BoE Interest Rate Freeze
The Pound (GBP) has fallen by -1.2% against the South African Rand (ZAR) today, after the Bank of England (BoE) left interest rates untouched in May.
This was the predicted outcome, but has still caused widespread Pound losses as GBP traders try to work out when the next interest rate hike could be.
Such speculation may influence the GBP/ZAR exchange rate going ahead, as analysts consider whether positive UK data will make a 2018 rate hike more likely.
In the latest BoE minutes, it has been revealed that policymakers believe:
‘There was value in seeing how the data unfolded over the coming months, to discern whether the softness in Q1 might persist.’
If the rest of May and June brings strong UK data releases, the Pound may progressively rise on hopes for an interest rate hike on 21st June.
Risk of GBP/ZAR Exchange Rate Losses on Higher UK Unemployment Rate
Unfortunately for Pound (GBP) traders, the next high-impact UK economic data could cause further losses against the Rand (ZAR).
This will be March’s unemployment rate reading, out on the coming Tuesday.
The UK jobless rate is tipped to rise from 4.2% to 4.3%; such a result could add to the worries of Pound traders and cause greater GBP/ZAR exchange rate losses.
ZAR/GBP Exchange Rate Forecast: Will Retail Sales Slump Damage the Rand?
Despite reports of a sharp slowdown in South African mining output, the South African Rand to Pound (ZAR/GBP) exchange rate has still been favourable today.
Looking ahead, the Rand could fall back against Sterling when retail sales data is released on the coming Wednesday.
The readings for March are tipped to show significant month-on-month and year-on-year slowdowns, from 1.8% to -1.62% and from 4.9% to 2.3% respectively.
Levels of sales activity in South Africa have fluctuated since July 2017, with growth in one month being replaced by contraction the following month.
If the upcoming sales figures show a sharp slowdown then Rand exchange rates could fall during the coming week.
Chance of South African Rand to Pound (ZAR/GBP) Advance if ZAR/USD Exchange Rate Rises
Less concretely, those looking for sources of ZAR/GBP exchange rate movement will also want to keep an eye on the Rand’s performance against the US Dollar (USD).
As a commodity currency, the Rand is often influenced by significant changes in the value of the US Dollar, as many global resources are bought and sold in USD.
Economists have forecast that there could be a recovery of the Rand against the US Dollar in the next six months, which might raise overall perceptions of the ZAR.
Outlining the current status of the South African economy, Christopher Shiells of Informa Global Markets said:
‘I no longer see South Africa the same as Turkey or Argentina.
‘Don’t get me wrong, South Africa still has structural issues (such as) a current account deficit that relies on foreign portfolio flows to fund, and this has driven Rand weakness.’
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