GBP/ZAR Exchange Rate Falls Back as Haskel Comes Across as Dovish
UPDATE 13:15 BST: After initially strengthening at the start of the session, the Pound South African Rand (GBP/ZAR) exchange rate has fallen back this afternoon, as MP’s quizzed Jonathan Haskel over his appointment to the Bank of England’s (BoE) Monetary Policy Committee (MPC).
Sterling sentiment quickly fell during Haskel’s appearance as his responses to MPs were general perceived as being dovish in tone.
Given that Haskel will be taking over for the notoriously hawkish Ian McCafferty, markets fear this could see the BoE lean towards being more dovish in the future.
Incoming member BoE Haskel leaning on the dovish side…. reminder, he will be replacing one of the most hawkish members McCafferty $GBP
— Justin McQueen (@JMcQueenFX) June 26, 2018
GBP/ZAR Exchange Rate Fluctuates as Hawkish BoE Meeting Offset by Brexit Uncertainty
The Pound South African Rand (GBP/ZAR) exchange rate was met by significant volatility last week, with the pairing briefly soaring against the Rand during the middle of the week, before crashing back to earth at the tail end of the session.
In terms of Sterling (GBP) its gains last week were mostly driven by a hawkish shift from within the Bank of England (BoE), however, the currency fell back on Friday as Brexit concerns began to drag once again.
For the Rand (ZAR) its initial losses were driven by some softer-than-expected domestic inflation figures at the start of the week, with the ZAR exchange rate firming in the latter half of the session as market risk appetite crept higher.
South African Rand (ZAR) Exchange Rate Suffers Sell-Off as Trader Tensions Continue to Escalate
The start of this week’s session has seen the South African Rand (ZAR) placed on the back foot once again, as it becomes a victim of a broad-based sell-off of emerging currencies in light of growing global trade tensions and US Fed tightening.
This latest escalation in trade war fears was prompted by reports on Monday that the White House may be preparing to impose restrictions on Chinese investment in the US, something which is likely to further escalate tensions with Beijing.
Things were made even worse following a tweet from US Treasury Secretary Steve Mnuchin late on Monday, in which he suggested this curb on investment was specific to China.
On behalf of @realDonaldTrump, the stories on investment restrictions in Bloomberg & WSJ are false, fake news. The leaker either doesn’t exist or know the subject very well. Statement will be out not specific to China, but to all countries that are trying to steal our technology.
— Steven Mnuchin (@stevenmnuchin1) June 25, 2018
This stoked fears of a wider crackdown by the US government, something which led to trade tensions intensifying even further and dragging on emerging currencies like the Rand.
Pound South African Rand (GBP/ZAR) Exchange Rate Appreciates Following Surprise Uptick in Mortgage Approvals
At the same time, the Pound Sterling (GBP) exchange rate is accelerating this morning as markets welcome an unexpected uptick in the UK’s latest mortgage figures.
According to data published by UK Finance, domestic mortgage approvals jumped from 38,300 in April to 39,200 in May, beating forecasts they would remain flat and striking their best levels since January.
The rise reflects well on the state of the UK economy, with the GBP exchange rate rising as analysts suggest this is evidence that the recent rise in wages has helped to bolster consumer confidence.
GBP/ZAR Exchange Rate Forecast: Will Dovish Carney Talk Down the Pound?
Looking ahead, the GBP/ZAR exchange rate may struggle on Wednesday as markets await a speech by BoE Governor, Mark Carney.
Carney could prove to be a drag on the Pound this week should he strike a more cautious tone tomorrow, as this would dampen down hopes of the BoE targeting a rate hike in August.
Sterling (GBP) may also see some movement at the very end of the week, with the UK’s final GDP reading for the first quarter expected to confirm that domestic growth slowed to just 0.1% at the start of 2018.
Meanwhile an expected dip in South Africa’s Producer Price Index is likely to weigh on the South African Rand (ZAR) when May’s figures are published on Thursday.