The Pound made dramatic gains against the South African Rand thanks to a forecast-beating rise in UK inflation.
Looking at the UK inflation figures in greater detail, the 2.9% rise in August put inflation at the joint-highest level for 2017, having previously hit this figure in May.
This news triggered an immediate Pound rally, as traders thought that it would put pressure on the Bank of England (BoE) to raise interest rates.
However, while higher inflation may well bring higher interest rates in the medium term, it has also amplified the difficulties consumers face in a climate of sluggish wage growth.
South African Rand Tumbles on High Court Action
GBP/ZAR has gained in response to the UK’s news, but also as a result of uncertainty over South Africa’s leadership.
Having recently survived a secret vote of no confidence, President Jacob Zuma has since been upset in his efforts to secure a supportive candidate for the ANC leadership.
Zuma is currently President of South Africa and head of the ANC party, but is due to step down from the party leadership in December. He will remain President until 2019.
The High Court has recently overturned the election of ANC officials favourable to Zuma, which throws the future ANC leadership into question.
As Zuma is a controversial leader, his departure could cause the Rand to appreciate on the prospect of improved political stability.
GBP ZAR Exchange Rate Volatility likely in Run-Up to BoE Meeting
This week, Pound/Rand exchange rate movement is likely to follow Wednesday’s UK jobs and earnings figures, as well as Thursday’s Bank of England (BoE) policy meeting.
An increase in UK average earnings would be Pound-supportive, as would hawkish comments from the Bank of England’s (BoE) Monetary Policy Committee on Thursday.
The only notable South African news will be Wednesday’s business confidence score, which is forecast to show a marginal decline.