The Pound has managed to record major gains against the South African Rand of late, largely owing to the latest detrimental developments in South Africa’s economic situation.
GBP/ZAR gains have mainly been facilitated by the Rand’s losses, given that the latest UK data has not been particularly supportive.
Last week saw the pairing rise to an early high of 22.1277 before falling back to 21.5564.
UK Inflation Rate, Concerns Raised over Future BoE Interest Rate Decisions
The Pound managed to record a sizable 0.5% gain against the South African Rand before its advance was tempered by the latest CPI stats concerning the UK.
Forecasts were fairly negative to begin with, but the latest inflation rate results have shown larger-than-expected dips in the base monthly and annual fields, as well as for the core yearly variant.
In response to the news, Economist Ruth Miller of Capital Economics has warned that ‘today’s figures may reinforce the market’s view that interest rates will stay on hold until 2019’.
This exceptionally dovish forecast is likely to keep pressure on the already flagging Pound, given that ‘optimistic’ predictions have been for no BoE activity regarding the national interest rate until after the EU Referendum next month, at the earliest.
South African Rand Slumps as Finance Minister Troubles Resurface
The Rand has been on a significant downtrend recently owing to developments in the South African government.
Adding to President Jacob Zuma’s generally destabilising influence regarding the national economy, the Rand has been laid low by the news that Zuma’s appointed Finance Minister, Pravin Gordhan, could be facing charges, and potential arrest, for spying.
In the outcome of such an event, the risk is that President Zuma could appoint another less experienced Finance Minister; at the end of 2015, Zuma sent the Rand tumbling when just such a situation occurred.
GBP/ZAR Exchange Rate Forecast
For the current week, Pound Sterling/South African Rand exchange rate movement may occur as a result of tomorrow’s UK earnings, unemployment and claims stats, as well as Thursday’s retail sales figures.
South Africa is set to publish inflation and retail sales data for April and March, as well as Thursday’s South African Reserve Bank (SARB) interest rate decision.
UK predictions for tomorrow have been mixed across the board, although expectations are for an overall rise in retail sales.
Predictions have been for an increase in South African inflation, a drop in retail sales and a freeze at 7% for the interest rate.
Heads Up
Summary of major upcoming data releases that we think may move the market.