GBP/ZAR Exchange Rate Forecast: Sterling Strengthens as UK Government Borrowing Beats Expectations

GBP/ZAR Exchange Rate Update: Sterling Strengthens as UK Government Borrowing Beats Expectations

The Pound South African Rand (GBP/ZAR) exchange rate is on the rise again this afternoon as Sterling was bolstered by some positive public borrowing figures from the UK.

The Office for National Statistics (ONS) reported earlier today that government borrowing dropped to its lowest annual level in 11 years as borrowing fell to £42.6bn over the last twelve months.

This was below the government’s target for the 201718 financial year and saw the Pound (GBP) exchange rate propelled higher.

Meanwhile the South African Rand (ZAR) exchange rate struck lower again this afternoon as it continued to face pressure from a resurgent US Dollar (USD).

GBP/ZAR Exchange Rate Plummets as Carney Remarks Prompt May Rate Hike Odds to Slide

After briefly striking a four-month high at the start of last week’s session the Pound to South African Rand (GBP/ZAR) exchange rate found itself in freefall as markets soured on the possibility of a Bank of England (BoE) rate hike next month.

Markets odds of a May rate hike swiftly fell from 85% to 56% last week following some softer-than-expected inflation figures and signals from BoE Governor Mark Carney that the bank may wait until later in the year to raise interest rates.

Meanwhile the South African Rand (ZAR) exchange rate was buoyed last week by some upbeat data, with domestic retails sales beating expectations to rise from 3.3% to 4.9% in February.

Pound (GBP) Exchange Rate Strained by Rate Hike Doubts

While the Pound Sterling (GBP) exchange rate mounted a notable recovery at the start of this week’s session, the currency was facing headwinds again this morning as markets continued to mull over the possibility of a rate hike next month.

Economists appear to be split over whether the BoE will raise interest rates next month, with some suggesting that there is still a strong case for a hike while other warn that weaker inflation will see the BoE hold off for now.

This uncertainty is making it extremely difficult for the Pound to hold onto its recent gains as it makes GBP investors increasingly skittish.

South African Rand (ZAR) Exchange Rate Nosedives in Face of Resurgent US Dollar (USD)

At the same time the South African Rand has faced a heavy sell-off during the first half of this week’s session, with the ZAR/GBP exchange rate relinquishing nearly all of last week’s gains as it is pressured by the strength of the US Dollar (USD).

Investors are flocking to the US Dollar this week as the currency’s appeal continues to be bolstered by rising US treasury yields, which in turn has spurred a sell-off of emerging currencies such as the South African Rand (ZAR).

Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions, said:

‘The Rand (ZAR) will remain under pressure as long as the US Dollar (USD) retains its strength, but the local currency has also been heavily overvalued in recent months.’

While the Rand made some headway towards recouping some of its losses against the Pound (GBP) early on Tuesday, the increasingly bullish US Dollar threatens to unwind the ZAR exchange rate once again if the currency fails to find some fundamental support.

GBP/ZAR Exchange Rate Forecast: Will Slowing Growth Dent Sterling?

Looking ahead the GBP/ZAR exchange rate may stumble again later this week with the publication of the UK’s latest GDP figures.

Economists forecast that some weak UK economic data over the last three months will have seen growth slow from 0.4% to 0.3% in the first quarter, likely applying further pressure to the Pound (GBP) exchange rates.

Meanwhile the South African Rand (ZAR) could find some support later in the week as the latest domestic Producer Price Index is expected to see prices rebound from -0.3% to 0.25% in March.

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