Pound South African Rand (GBP/ZAR) Exchange Rate Rangebound Following FOMC Minutes

Pound South African Rand Exchange Rate Flat in USD Dominated Trade 

The Pound South African Rand (GBP/ZAR) exchange rate is stuck in a narrow range this morning as a stronger US Dollar (USD) currently dominates trade. 

At the time of writing the Pound South African Rand exchange rate is trading at around ZAR21.1455, virtually unchanged from this morning’s opening rate. 

South African Rand (ZAR) Subdued Following Hawkish FOMC Minutes  

The South African Rand (ZAR) is mostly rangebound so far this morning, as a strong US Dollar limits the appeal of the emerging market currency. 

This comes in the wake of a glut of positive US economic data yesterday, including the publication of the minutes from the Federal Reserve’s November policy meeting. 

The Federal Open Market Committee (FOMC) minutes highlight how a number of Fed policymakers have advocated for the US central bank to accelerate the tightening of its monetary policy. 

Also continuing to limit the upside potential of the Rand are contagion fears from the ongoing collapse of the Turkish Lira (TRY), which has plummeted roughly 15% so far this week. 

Pound (GBP) Muted amidst Brexit Uncertainty 

At the same time, the Pound (GBP) is also trading without any strong directional bias amidst ongoing Brexit uncertainty. 

Despite a softening of the UK’s rhetoric in recent weeks, negotiations between the UK and EU regarding the controversial Northern Ireland protocol remain deadlocked, with Maros Sefcovic, the vice president of the European Commission, warning talks could drag into next year

Sefcovic, said: 

‘I think that if there was the clear political will from the UK side these … problems could be solved. But looking at how far we progressed over the last four weeks, the level of detail our UK partners want to discuss, I know that we will probably not be able to resolve everything before the end of the year.’ 

GBP investors remain wary of the talks amidst fears a breakdown could trigger a trade dispute between the UK and EU. 

Pound South African Rand Exchange Rate Forecast: Speech by BoE’s Bailey in the Spotlight 

Still to come today will be a speech by Bank of England (BoE) Governor Andrew Bailey, which could influence the direction of the Pound South African Rand (GBP/ZAR) exchange rate later this evening. 

The overwhelming majority of GBP Investors see the BoE hiking interest rates when the bank next meets in December, and Bailey is widely expected to reinforce these expectations with some hawkish comments later today. 

However, this must not be taken for granted after Bailey struck a slightly more cautious tone in remarks made over the weekend, with the Pound likely to weaken if he echos this sentiment today. 

Meanwhile, in the absence of any notable domestic data, the Rand will likely trade on external factors through the latter half of this week, potentially leading to losses if a risk-off mood prevails. 

Matthew Andrews

Contact Matthew Andrews