Pound South African Rand Forecast: GBP/ZAR to Rally on BoE Rate Hike Speculation?

Will Hawkish Speech from BoE’s Haldane Prompt Uptick in GBP/ZAR?

After slumping this morning, analysts suggest that the Pound South African Rand (GBP/ZAR) exchange rate may rally later today following a speech by the Bank of England’s (BoE) Andy Haldane.

Haldane is currently scheduled to speak at the Royal Society for the Encouragement of Arts, Manufactures, and Commerce later this evening.

While investors are not expecting any major revelations from the speech, a hawkish outlook from the BoE’s Chief Economist could set the tone for the GBP/ZAR exchange rate in overnight trade.

Profit Taking leads to Sharp Rally in GBP/ZAR

After slumping throughout February the Pound to South African Rand (GBP/ZAR) exchange rate rebounded last week as the Rand was hit by a bout of profit taking.

While the Rand showed strength at the start of last week, with markets welcoming President Cyril Ramaphosa’s cabinet reshuffle, the move had already been largely priced in and ZAR failed to push higher.

In fact the Rand almost immediately fell back as markets rushed to take advantage of the currency’s recent gains, amid concerns that it may have been overbought.

Meanwhile the Pound advance was not without its hurdles as Theresa May’s rejection of a draft EU Brexit agreement led to a sharp rise in Brexit uncertainty, which weighed on GBP.

However the rally in GBP/ZAR intensified at the end of the week as some better-than-expected PMI figures helped to bolster the appeal of Sterling.

South African Rand (ZAR) Bolstered by Strong GDP Figures

The South African Rand looks set to recoup much of last week’s losses this morning as investors welcome the country’s latest GDP figures.

According to data published by StatsSA, South Africa’s economy grew 3.1% in the fourth quarter, beating forecasts of more modest expansion of 1.8%.

The uptick in economic activity appeared to be supported by strong agricultural growth last year as the sector mounted a recovery following a drought in 2016.

StatsSA reported:

‘The strengthening in economic activity over 2017 was partly driven by an agriculture industry bouncing back from one of the worst droughts in recent history.

‘A bumper maize crop and recovery in other agricultural commodities saw agriculture production rise by 17.7% in 2017 compared with 2016.’

Pound (GBP) Suffers Following Warning about Possible Rise in Insolvencies

Meanwhile Sterling sentiment is sliding this morning as trade insurer Euler Hermes warns that the UK is likely to see a large rise in insolvencies in 2018.

The report published by Euler Hermes suggests that the number of businesses failing in 2018 is likely to grow by 8% in 2018, the second-largest rise in insolvencies of any major global economy.

Analysts suggest that growing Brexit uncertainty will be a major contributing factor as rising costs and falling consumer confidence take their toll on businesses.

GBP/ZAR Forecast: UK Trade Deficit to Narrow?

Looking ahead the release of the UK’s latest trade figures is likely to be a key driver in movement for the GBP/ZAR exchange rate this week.

Economists forecast the Pound may strengthen on Friday as the UK’s trade deficit is predicted to have narrowed in January, while industrial production is expected to have rallied after a sharp decline in December.

Meanwhile with a lull in economic data until next week, the South African Rand may begin to fall back again later this week as some of the euphoria surrounding Ramaphosa begins to fade.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail