Last Week: GBP/ZAR Exchange Rate Jumps as Huawei Arrest Spooks Investors
The Pound South African Rand (GBP/ZAR) exchange rate broke its recent run of losses last week as the Rand faced sharp losses in the face of renewed risk aversion.
However this was confined to the latter half of the session, with the Rand strengthening through the start of the week as ZAR investors cheered South Africa’s latest GDP figures which showed the country had clawed its way out of a technical recession in the third quarter.
It was the news of an arrest of an executive from Chinese telecoms giant Huawei on US fraud charges that ultimately prompted the Rand to retreat through the second half of the week, with fears the arrest could reignite tensions between the US and China rattling markets.
Meanwhile Brexit sentiment continued to shape Sterling last week, with a series of parliamentary defeats for the government proving to be GBP positive as MPs were granted a greater say on Brexit, bolstering hopes the UK would avoid a no-deal scenario.
Today: Pound (GBP) Exchange Rates Rally on Strong UK Wage Growth
Despite the Pound (GBP) facing heavy losses against the majority of its other peers on Monday following Theresa May’s decision to delay a key Commons vote on her Brexit deal, Sterling was able to hold steady against the South African Rand (ZAR) yesterday.
Thanks to this GBP/ZAR was stuck a two-week high this morning as investors welcomed the release of the UK’s latest employment figures, particularity the continued upswing in UK wage growth.
According to data published by the Office for National Statistics (ONS), domestic wage growth leapt from 3.1% to 3.3% in October, beating expectations it would remain steady, and striking a 10-year high.
This acceleration in wage growth is seen as increasing the chances of a rate hike from the Bank of England (BoE) in the coming months, so long as greater clarity over Brexit is forthcoming in the New Year.
GBP/ZAR Exchange Rate Forecast: Robust Inflation to Offer Lifeline to the Rand?
Looking ahead to the remainder of this session, South Africa’s upcoming Consumer Price Index appears to be the only release of note left this week.
Economists forecast the index will show that inflation held at 5.1% in November, potentially prompting the Pound South African Rand (GBP/ZAR) exchange rate to reverse course on Wednesday if the robust figures are seen as bolstering the case for another rate hike from the South African Reserve Bank (SARB).
In the meantime Brexit is likely to continue to dominate Sterling sentiment throughout the remainder of the week as Theresa May meets with EU leaders and officials in an attempt to save her withdrawal deal after postponing a parliamentary vote scheduled to have taken place today.
European Council President Donald Tusk said that leaders will be willing to work with May to help ‘facilitate UK ratification’ but that the EU would ‘not renegotiate’ any part of the deal already signed off at last month’s summit.