Rampant US Dollar impacts Pound South African Rand Exchange Rate: GBP/ZAR Volatile on Iran Nuclear News

GBP/ZAR Exchange Rate Fluctuates as the US Dollar Continues to Tick Higher

The Pound South African Rand (GBP/ZAR) exchange rate initially surged higher at the start of last week’s session as the continued uptick in the US Dollar (USD) limited market appetite for emerging currencies.

However the pairing gains throughout the week were capped by the release of the UK’s latest PMI figures, with some weaker-than-expected growth in the UK’s private sector weighing on Sterling (GBP) sentiment.

Concerns that this may lead to another weak quarter of UK economic growth weighed on the GBP/ZAR exchange rate throughout the second half of the session, with the pairing nosediving on Friday.

Pound South African Rand (GBP/ZAR) Exchange Rate Rises as US Scrapping of Iran Deal Unsettles Markets

The Pound South African Rand (GBP/ZAR) exchange rate looks to be striking higher again in the wake of Donald Trump’s decision to pull the US out of the Iranian nuclear deal.

Rand sentiment slumped on Wednesday as Trump’s scrapping of the Iran deal prompted a sharp rise in geopolitical uncertainty, with commodity-linked and emerging currencies tumbling as market risk appetite slumped.

Michelle Wohlberg, analyst at Rand Merchant Bank said:

‘This (decision) led to a US Dollar rally and resulted in US Treasuries moving higher. This should affect emerging markets adversely as a global risk-off sentiment takes hold.’

Sterling (GBP) Exchange Rate Capped by Gloomy Retail Report

At the same time the advance in the Pound Sterling (GBP) exchange rate this morning has been tempered somewhat by a report from the British Retail Consortium (BRC) on the state of the retail sector in April.

According to the report retailers suffered their sharpest drop in business in over 20 years last month as an early Easter and poor weather disrupted trading.

Helen Dickinson, BRC’s chief executive said:

‘With much of the spending in preparation for the bank holiday weekend falling in March this year, a record low in sales growth, in contrast to last year’s record high, does not come as a surprise.’

Retailers appear to be equally gloomy in their outlook for the coming year as they fear economic uncertainty will cause consumers to continue to tighten their belts despite a pickup in wage growth.

GBP/ZAR Exchange Rate Forecast: Will a Hawkish BoE Outlook Prompt Sterling to Surge?

Looking ahead, the second half of this week is likely to see considerable movement in the GBP/ZAR exchange rate as the Bank of England (BoE) concludes its latest rate decision.

While a rate hike this month now looks extremely unlikely given the recent run of soft UK data, there are hopes from investors that the bank’s forward guidance may prove positive for the Pound (GBP) if policymakers appear optimistic on the chances of a rate hike still taking place later in 2018.

Meanwhile the South African Rand (ZAR) exchange rate may look to rally on Thursday as domestic manufacturing production figures are expected to show a rebound in factory output in March.

However with the strength of the US Dollar (USD) continuing to apply pressure to emerging market currencies, some upbeat production figures may not be enough for the Rand to sustain any gains.

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