GBP/ZAR Exchange Rate Slides on the Back of Emerging Market Rally
The Pound South African Rand (GBP/ZAR) exchange rate fell back from a two-year high during last week’s session, with the Rand being granted some respite following a pause in the recent emerging market sell-off.
While this was partly thanks to a draw back in the US Dollar (USD), it was the Turkish central bank’s decision to push forward with a dramatic rate hike that seemed to most shore up confidence in emerging market (EM) currencies.
Meanwhile the Pound got off to a strong start last week as the EU’s chief negotiator Michel Barnier appeared optimistic on the chance of a Brexit deal being reached by November.
However Sterling was unable to build on this momentum, with the currency falling back as the Bank of England’s (BoE) latest policy meeting resulted in the bank leaving interest rates on hold as expected.
South African Rand (ZAR) Exchange Rates Fluctuates on US Tariff Announcement
The South African Rand (ZAR) has been met by volatility against the Pound (GBP) at the start of this week’s session following a mixed reaction to the latest round of US trade tariffs.
The rand initially tumbled on Monday as US President Donald Trump sparked another escalation in global trade tensions when he imposed tariffs on a further $200bn worth of Chinese goods, with investors fearing the impact a potential trade war could have on global trade-focused emerging markets.
However, amidst a surprise drop in the US Dollar (USD) the Rand is firming this morning, with the ZAR/GBP exchange rate having recouped almost all of Monday’s losses.
Safe-haven demand has seen the US Dollar benefit from these trade war fears in recent months, so this reversal comes as a bit of a shock to many, with analysts suggesting it stems from worries over how the wider tariffs could impact the US economy.
Meanwhile Beijing’s move to protect the Chinese Yuan (CHY) is proving positive for EM currency sentiment this morning.
GBP/ZAR Exchange Rate Forecast: Markets Brace for SARB Rate Decision
Looking ahead to the remainder of the week, movement in the Pound South African Rand (GBP/ZAR) exchange rate is likely to be driven by the South African Reserve Bank’s (SARB) latest policy meeting as a number of analysts suggest a surprise hike from the bank remains a distinct possibility.
With the Rand having weakening almost 10% since the SARB’s previous policy meeting, some economists are suggesting a hawkish hold may not cut it this month, especially after rate hikes from the Turkish and Russian central banks last week.
Meanwhile the Pound may trend lower on Wednesday with the release of the UK’s latest Consumer Price Index (CPI).
Economists forecast that tomorrow’s CPI figures will show inflation slowed from 2.5% to 2.4% last month, potentially dragging on Sterling if it weakens the case for the BoE to raise interest rates.