Pound South African Rand (GBP/ZAR) Exchange Rate Slips as CPI Figures Published
The Pound South African Rand (GBP/ZAR) exchange rate slipped over the course of the morning and the pairing is currently trading at an inter-bank rate of 19.1557R.
This morning, data revealed that the UK Consumer Price Index (CPI) rose by a higher-than-forecast 1.9% in the 12 months leading up to February.
Commenting on this, Chief Economist at KPMG, UK Yael Selfin said:
‘Solid wage growth and minimal spare capacity could encourage the Bank of England to raise rates once more by November this year to 1%.
‘Strong services inflation compared to goods inflation point at the simmering inflationary pressures as a result of rising wages and the record tight UK labour market.
‘Our expectations are for inflation to average around the Bank of England’s 2% target this year but to rise further in 2020, putting pressure on them to act more aggressively than markets currently anticipate.’
However, official data also showed that house prices rose at the weakest annual pace in five-and-a-half years, which likely weighed on Sterling.
Core inflation also edged down, leaving domestic price pressures muted ahead of Brexit, which likely further dampened sentiment in Sterling.
South African Rand (ZAR) Rises as South African CPI Inflation Increases
The Pound South African Rand (GBP/ZAR) exchange rate continued to rise despite the prospect of rolling blackouts across the country and weak demand for local South African currency.
Investors remain cautious as South Africa’s power utility Eskom has stated it would continue implementing power cuts as it struggles with generating capacity shortages.
Analysts have identified the power cuts, which have been occurring since June 2018, as one of the reasons why business confidence has fallen over the past few months.
Meanwhile, Statistics South Africa revealed on Wednesday that headline consumer inflation rose to an annual 4.1% in February from the previous month’s 4%.
Monthly inflation rose by 0.8% after contracting by -0.2% the previous month, which likely sparked an increase in sentiment in the Rand (ZAR).
Core inflation remained unchanged at 4.4% in February, however the monthly figure rose to 1.1%.
Sterling (GBP) Slips as PM to Ask EU for a Short Article 50 Brexit Extension
Today it is widely expected that the Prime Minister will request an extension to Article 50 from the European Union.
Likely weighing on the Pound (GBP) are reports stating that Theresa May will not be requesting a long extension, with a delay not going beyond the end of June.
The short extension was called a ‘wrong choice’ and a ‘craven surrender to hard liners’ by an anonymous UK cabinet minister.
Talking to the German radio station, Deutschlandfunk, European Commission President Jean-Claude Juncker implied the EU may postpone their decision until it had ‘more clarity’ from the UK.
He stated:
‘As long as we don’t know what Britain will say yes to, we can’t come to a resolution.
‘We will probably have to meet again next week, because Mrs May has not got agreement for anything either in her cabinet or her Parliament.’
Pound South African Rand Outlook: Will the GBP/ZAR Exchange Rate Rally on a Hawkish BoE?
Looking ahead to Thursday, the Pound (GBP) could slip further against the South African Rand following the release of the UK retail sales figure.
If monthly retail sales contract by -0.4% or more as forecast in February, it could dampen sentiment in the UK currency.
Later on Thursday afternoon, the Bank of England (BoE) is due to release its interest rate decision and meeting minutes.
If the BoE hold interest rates as expected, and the minutes suggest that the central bank believe that an interest rate hike could be in sight for 2019, the Pound South African Rand (GBP/ZAR) exchange rate could rally.