The Pound to South African Rand exchange rate rallied by 0.7% on Tuesday as GBP firmed on Bank of England (BoE) hopes while the Rand suffered from a selloff in emerging market currencies.
GBP/ZAR briefly touched a high of 17.57 on Tuesday morning, its best level in over two months.
Pound Sterling Firms Ahead of Key Data
After a bit of a lull at the beginning of the week the Pound firmed slightly on Tuesday in anticipation of speeches from the Bank of England (BoE) and UK employment news.
With Britain’s economic and political outlook uncertain, GBP exchange rates have been largely driven by BoE rate hike speculation in recent weeks.
While some BoE officials have been taking a surprisingly hawkish stance on the future path of monetary policy, last week’s poor UK ecostats have dampened BoE bets again.
As officials like Chief Economist Andy Haldane have indicated that the bank’s stimulus measures may need to be lightened if Britain’s economy shows resilience in the second half of 2017, stats which pointed to slowing output in Q2 weighed on the Pound.
South African Rand Suffers from Emerging Market Selloff
Political uncertainty in South Africa has left the Rand struggling of late, giving even the embattled Pound the chance to reach multi-month highs against it.
The African National Congress (ANC) recently spooked markets by suggesting the South African Reserve Bank (SARB) should be nationalised. This caused another surge of concern about the central bank’s independence.
This week the Rand has remained soft despite attempts to reassure markets of the SARB’s neutrality.
Emerging market currencies like the Rand have also been pressured lower by rising bets that the Federal Reserve will continue hiking US interest rates in 2017.
GBP/ZAR Forecast: UK Wage Data on Wednesday
The South African Rand is unlikely to be influenced much by economic data in the coming week, but Wednesday’s UK wage growth results are likely to have a big impact on the Pound.
Better-than-forecast UK wage data would be Pound-positive, while disappointing earnings numbers would increase the pressure on UK consumers and leave Sterling struggling.
Any comments from BoE officials also have the potential to influence the Pound to Rand exchange rate. If BoE policymakers adopt a hawkish stance despite recent poor ecostats, BoE tightening bets will rise and the Pound could surge.
Meanwhile, Wednesday’s Q1 South African consumer confidence stats may offer the Rand some support if they beat expectations.