The Pound to South African Rand exchange rate continued to advance on Monday after its impressive recovery late last week, as investors sold the Rand from its best levels and the currency was undermined by an increase in USD strength. GBP/ZAR has gained over a cent since markets opened for the week, and at the time of writing was trending near 19.2670.
Pound (GBP) Limp, Lacks Supportive Data
Monday’s economic calendar for Britain was relatively barren, leaving Pound Sterling to trend within a limited range when markets opened this week.
Sterling is largely holding its ground after firming last week following the recent run of comparatively optimistic UK datasets.
British PMIs beat expectations in August, adding to hopes that economic activity would rebound following July’s Brexit-inspired downtick.
However, as more vital August data approaches, as well as the Bank of England’s (BoE) September policy meeting, optimism surrounding the Pound has faded slightly. Investors are currently on pause ahead of this week’s influential UK releases.
South African Rand (ZAR) Falls with Fed Rate Hike Bets in Focus
The South African Rand surged at the beginning of last week, boosted by a surprisingly solid South African Gross Domestic Product (GDP) report.
The figures indicated that despite recession in Q1, South Africa’s economy had experienced solid growth of 3.3% in Q2 and was on track to reach 0.6% year-on-year.
However, as the Rand surged across the board it eventually hit key levels of psychological resistance and was sold off in a bout of profit-taking.
The Rand’s losses were worsened later in the week as markets increased bets that the Federal Reserve would hike US interest rates in 2016 – perhaps as soon as September.
As the US Dollar is a ‘safe-haven’ currency, investors poured out of risk-correlated currencies and emerging market currencies like the Rand as USD strengthened. This movement continued on Monday.
GBP/ZAR Exchange Rate Forecast: Sterling to Drive Movement this Week
The coming week is a vital one for British economic news, and as a result the Pound is likely to drive GBP/ZAR movement unless a significant shift in risk-sentiment makes the Rand bullish.
This week’s South African data is unlikely to be considerably influential, with Q2 account data due for publication on Tuesday and retail sales figures due on Wednesday.
Britain’s economic calendar, on the other hand, will be bustling from Tuesday until Thursday. Tuesday will see the publication of the UK’s highly anticipated August Consumer Price Index (CPI) figures, which some analysts predict will see an uptick of inflation due to the low value of the Pound.
Sterling’s low value is predicted to cause an increase in consumer prices, which could cause trouble for the Bank of England (BoE) – which is set to hold its next meeting on Thursday.
Markets do not expect a change in monetary policy from the BoE’s September meeting, but the tone the bank takes in relation to August’s better-than-expected news is certain to set Sterling movement for the remainder of the week.