Pound South African Rand (GBP/ZAR) Exchange Rate Slides as Inflation Meets SARB’s Target
The Pound South African Rand (GBP/ZAR) exchange rate slumped by around -0.5% today, leaving the pairing trading at around R19.4193.
The South African Rand rose on Wednesday following the release of consumer inflation figures.
The country’s inflation rate hit a seven-month high in January. Annual inflation rose from 4% to 4.5%, below the bank’s upper inflation target of 6%.
ZAR rose as this will not put pressure on the South African Reserve Bank (SARB) to pursue tighter monetary policy.
This meant the Rand was able to rebound after ratings agency, Moody’s halved its economic growth forecast earlier this week.
Earlier, fears that South Africa could lose its final investment grade rating pushed the currency to a one-week low.
Sterling (GBP) Slides despite Upbeat UK Inflation
Sterling continued to fall against the Rand despite unexpectedly upbeat UK inflation data.
The Office for National Statistics (ONS) showed inflation jumped to a six-month high of 1.8% in January. This is not far from the Bank of England’s (BoE) 2% target.
According to ONS statistician Mike Hardie:
‘The rise in inflation is largely the result of higher prices at the pump and airfares falling by less than a year ago.
‘In addition, gas electricities prices were unchanged this month, but fell this time last year due to the introduction of the energy price cap.’
However, some economists have said this may not have a huge effect on BoE interest rate prospects.
Commenting on this, Capital Economics’ senior UK economist, Ruth Gregory said:
‘While CPI inflation rose for the first time in six months, the inflation figures were in line with the Bank of England’s expectations, so they are unlikely to move the dial on the outlook for interest rates.
‘CPI inflation still looks likely to slip back to 1.5% within the next few months and remain below 2% for the rest of the year. But for the MPC, the fact that inflation is evolving in line with its projections provides another reason not to cut interest rates in the near term.’
Pound South African Rand Outlook: Will UK Retail Sales Buoy GBP?
Looking ahead, the Pound (GBP) could edge higher against the South African Rand (ZAR) following the release of UK retail sales.
If sales jump higher than expected in January, Sterling will receive an upswing of support.
Meanwhile, the Rand could suffer some losses following the release of December’s annual building permits data.
If building permits do not rise as high as forecast, the Pound South African Rand (GBP/ZAR) exchange rate will edge higher.