GBP/ZAR Exchange Rate Slumps as Weak Inflation Dents BoE Rate Expectations
UPDATE: The Pound South African Rand (GBP/ZAR) exchange rate fell sharply on Wednesday morning following the release of the UK’s latest CPI figures.
The data revealed UK inflation unexpectedly held at 2.4% in June, missing expectations that it would rise to 2.6% and prompted Sterling to plunge.
Questions will now be raised over whether the Bank of England (BoE) will raise interest rates in August, with the GBP exchange rate set to collapse should the bank chose to stay its hand once again.
GBP/ZAR Exchange Rate Slumps as Political Uncertainty Drags on Sterling Sentiment
The Pound South African Rand (GBP/ZAR) exchange rate tumbled last week as political uncertainty in the UK drove significant losses in Sterling, starting with the resignation of two senior cabinet members on Monday.
While the Pound rallied in the middle of week, these gains proved to be fleeting, with GBP exchange rates nosediving again as President Trump warned the UK’s Brexit plan could ‘kill’ a trade deal with the US.
While Trump later backtracked on this statement in a joint press conference with Theresa May on Friday, it was not enough to resuscitate GBP/ZAR.
Meanwhile demand for the Rand fluctuated throughout the week’s session as emerging currencies were rocked by a further escalation in trade tensions between the US and China.
This saw ZAR exchange rates retreat mid-week as Trump pushed ahead with plans to impose tariffs on an additional $200bn worth of Chinese goods.
However the Rand rallied again in the second half of the session, with an easing of tensions as a strong uptick in domestic production figures helping to buoy the currency.
Pound Sterling (GBP) Exchange Rate Rallies on UK Labour Figures
The Pound Sterling (GBP) exchange rate is ticking up against the South African Rand this morning as markets react to the UK’s latest labour report.
Data published by the Office for National Statistics (ONS) this morning revealed domestic unemployment held at 4.2% in May, its lowest levels since 1975.
However despite the UK labour market tightening, UK wage growth appears to be failing to keep pace with average earnings sliding from 2.6% to 2.5% over the same period.
However despite this wages remained ahead of inflation in May and analysts are confident that the UK labour market continues to show strength.
Matt Hughes, statistician at the ONS said:
‘We’ve had yet another record employment rate, while the number of job vacancies is also a new record. From this, it’s clear that the labour market is still growing strongly.’
South African Rand (ZAR) Exchange Rates Weakened by Dip in Consumer Confidence
Meanwhile the South African Rand (ZAR) is trending lower this morning, following a slight dip in South Africa’s latest consumer confidence reading.
The consumer confidence index (CCI) was revealed to have fallen from 26 to 22 in the second quarter.
While this is still a strong result, remaining well clear of the negative results seen in 2017, it does hint that confidence in President Cyril Ramaphosa to deliver much needed reforms is beginning to weaken.
GBP/ZAR Exchange Rate Forecast: Will Uptick in UK Inflation Drive Gains in Sterling?
Looking ahead, movement in the Pound to South African Rand (GBP/ZAR) exchange rate on Wednesday is likely to be driven by the release of the UK’s latest CPI figures.
Markets are bracing for a likely lift in Sterling tomorrow as economists forecast UK inflation will have jumped from 2.4% to 2.6% in June.
Meanwhile, ZAR investors will be looking towards the South African Reserve Bank’s (SARB) rate decision on Thursday, with the Rand potentially sliding if the SARB appears cautious in the face of growing global trade tensions.