GBP/ZAR Exchange Rate Rides Higher on Dollar Strength and South African Political Concerns
A three-week run of consecutive losses for the Pound South African Rand (GBP/ZAR) exchange rate was broken last week thanks to a resurgent US Dollar (USD) and political concerns holding back the Rand (ZAR).
The losses in ZAR exchange rates were further accentuated by some disappointing domestic data, with investors fearing South Africa’s stubbornly high rate of unemployment will continue to hinder economic growth.
Meanwhile the Pound initially surged last week on the UK’s own employment figures, with a rise in basic pay being welcomed by investors as it seemed to mark the end of a year-long pay squeeze for UK consumers.
However, Sterling sentiment took a hit in the second half of the week as questions over the UK government’s position on whether to remain in the EU Customs Union led to renewed Brexit uncertainty.
South African Rand (ZAR) Exchange Rate Skyrockets as US Dollar (USD) Takes a Breather
The South African Rand (ZAR) is rocketing higher at the start of this week, with the GBP/ZAR exchange rate having already relinquished almost half of last week’s gains.
This rebound is partly attributed to a lull in the US Dollar’s (USD) recent rally, which has granted some respite to emerging currencies such as the Rand.
It remains to be seen if this pause in USD will be temporary, or whether ZAR could mount a more sustained recovery if the dip in the US Dollar exchange rate is the start of a larger correction as some economists forecast.
In a note to clients, analysts at Nedbank, said:
‘The dollar is overbought and a correction phase is imminent in our opinion.’
Pound South African Rand (GBP/ZAR) Exchange Rate Volatile as Carney Faces MPs
Meanwhile the Pound South African Rand (GBP/ZAR) exchange rate is fluctuating at the start of Tuesday’s session as the Bank of England’s Governor, Mark Carney faces a grilling from MPs in the Treasury Committee.
The focus of today’s meeting is the Bank’s decision to leave interest rates on hold this month after previously hinting that a rate hike was inbound.
This has led to MPs questioning the manner of the BoE’s forward guidance, with the BoE’s Gertjan Vlieghe indicating that the bank could do more to provide a clearer outlook in the future; a welcome notion from GBP investors who were burned by the bank’s so-called ‘unreliable boyfriend’ this month.
GBP/ZAR Exchange Rate Forecast: Can UK Inflation Help to Revive BoE Rate Expectations?
Looking ahead the main driver of movement in the GBP/ZAR exchange rate this week is likely to be the latest release of the UK’s CPI figures.
We could see the Pound (GBP) tick higher if the data reveals a surprise uptick in inflation last month, with rising inflationary pressure likely to bolster hopes of the BoE still raising interest rates later this year.
Meanwhile movement in the South African Rand (ZAR) this week is likely to be dictated by the South African Reserve Bank’s (SARB) latest rate decision.
The bank is widely expected to leave rates on hold this month, possibly prompting the Rand to fall back, especially if recent geopolitical tensions cause the bank to maintain a cautious stance in its forward guidance.