Pound South African Rand (GBP/ZAR) Exchange Rate Flat as SARB Cuts Interest Rates
UPDATE: The Pound Sterling South African Rand (GBP/ZAR) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of R17.3814.
On Thursday afternoon in a unanimous decision, the South Africa Reserve Bank (SARB) slashed interest rates for the first time since March 2018.
The risk-sensitive South African Rand was provided with an upswing of support, clawing back some of its losses from this morning.
The SARB cut rates by 25 basis points from 6.75% to 6.5%.
The bank stated that weak economic growth and inflation remaining at the mid-point of its target as the reasons for the cut.
Speaking at a news conference. SARB Governor Lesetja Kganyago said:
‘The MPC welcomes the continued downward trend in recent inflation outcomes and the moderation in inflation expectations of about one percentage point since 2016.’
Pound South African Rand (GBP/ZAR) Exchange Rate Rises as UK Retail Sales Rebound in June
The Pound Sterling South African Rand (GBP/ZAR) exchange rate edged up today, taking the pairing to an inter-bank rate of R17.4749.
The UK economy received a much-needed lift on Thursday morning as June’s retail sales rose unexpectedly.
According to data from the Office for National Statistics (ONS) retail sales unexpectedly rebounded in June.
Annual sales jumped by a higher-than-forecast 3.8% while monthly sales rose by 1%.
The Pound edged up against the South African Rand as the strong data offset fears the UK economy is in danger of shrinking in the second quarter.
OBR Warns the UK is Already Entering a ‘Full Blown Recession’
Meanwhile, a report from the Office of Budget Responsibility (OBR) did little to prevent the Pound rising.
The OBR warned that the UK will face a recession in the event of a no-deal Brexit and a £30 billion black hole will be left in public finances.
Added to this, the fiscal watchdog said recent data from June may indicate that the UK is already entering a ‘full blown recession’.
Meanwhile, commenting on the report, UK Chancellor Philip Hammond has stated that a no-deal could be even more of a blow to the economy than the OBR’s report has suggested.
Speaking to Sky News the current Chancellor stated:
‘The report that the OBR have published this morning shows that even in the most benign version of a no-deal exit there would be a very significant hit to the UK economy, a very significant reduction in tax revenues and a big increase in our national debt – a recession caused by a no-deal Brexit.
‘But that most benign version is not the version that is being talked about by prominent Brexiters. They are talking about a much harder version, which would cause much more disruption to our economy. And the OBR is clear that in that less benign version of a no-deal the hit would be much greater, the impact would be much harder, the recession would be bigger.
‘So I greatly fear the impact on our economy and our public finances of the kind of no deal Brexit that is realistically being discussed now.’
South African Rand (ZAR) Slumps as Central Banks Turn Dovish
At the start of Thursday’s session, the risk-sensitive South African Rand edged up slightly as markets await the local interest rate decision of the South African Reserve Bank (SARB).
However, following a mix of better-than-expected data from the UK, weak data economic data from Japan and US-China trade tensions the Rand slumped.
Growth fears and a cautious Federal Reserve has pushed central banks around the globe to adopt a more dovish position.
The Bank of Korea (BOK) cut interest rates on Thursday as brewing trade tensions with Japan increased pressure on the trade-dependent economy.
Added to this, Indonesia’s central bank slashed interest rates which likely dampened the risk-sensitive Rand ahead of this afternoon’s SARB interest rate decision.
Pound South African Rand Outlook: Will a Dovish SARB Weigh on ZAR?
Looking ahead to this afternoon, it is likely the South African Rand (ZAR) will slide against Sterling (GBP) following the release of the South African Reserve Bank’s (SARB) interest rate decision.
The South African Rand is likely to slide as the central bank is expected to cut interest rates.
Meanwhile, the Rand could be left under pressure as US-China trade discussions continue.
If reports suggest tensions have increased between the US and China, the Pound South African Rand (GBP/ZAR) exchange rate could rise.