Foreign Currency Market Update – GBP / ZAR Update
This week is forecast to be an interesting one for the South African Rand (ZAR) with Wednesday releasing a whole host of influential SA economic data. The Pound Sterling to South African Rand (GBP/ZAR) and the US Dollar to South African Rand (USD/ZAR) exchange rates were able to climb on Monday morning after last week’s events continued to ripple through the market. Friday saw Standard and Poor’s credit rating agency affirm a BBB- rating as well as a stable outlook—a move which came as a surprise to many. The South African Rand slipped by around 0.8% against the US Dollar as investors waited for the report. Earlier in the week the Rand had fallen to 13 ½ year lows; however Standard and Poor’s announcement allowed it to recover somewhat and move off the 12.50 psychological level. Fitch credit ratings agency also held South Africa’s rating at BBB with a negative outlook in recent weeks, rather than downgrading it as many economists had feared.
Meanwhile, the South Africa Reserve Bank (SARB) is forecast by economists to hike interest rates in July as inflation threats continue to weigh on the economy. Initially it was expected that the SARB would increase rates by 25 basis points in November as inflation is forecast to average 6.0% in the fourth quarter. Meanwhile, next year inflation is expected to creep over the SARB 3-6% target.
This week’s South African domestic data will detail how consumer prices are faring within the South African nation with the release of Inflation Rate and Core Inflation Rate data. Forecasts have suggested that the month of May will see inflation climb by 0.5% after April’s 0.9% reading, allowing the non-core annual inflation rate to climb from 4.5% to 4.6%. Meanwhile, the core inflation measure is expected to hold steady at 5.6%. South African Retail Sales data will also be out on Wednesday and is pegged to produce a mixed bag of results. While the month of April is forecast to see a 1.0% increase in consumer spending, the annual ecostat is predicted to be in for a drop from 2.0% to 1.8%.
There’s also likely to be some drastic movement in the Pound Sterling to South African Rand (GBP/ZAR) and US Dollar to South African Rand (USD/ZAR) exchange rates this week with the release of the Bank of England’s (BoE) meeting minutes and the Federal Open Market Committee’s (FOMC) interest rate decision on Wednesday. Additionally, the UK will release its own inflation figures on Tuesday, which could be a major source of market movement.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is trending at 19.2580. The US Dollar to South African Rand is trading in the region of 12.4052.
Heads Up
Summary of major upcoming data releases that we think may move the market.