Pound South African Rand Exchange Rate Falters as Markets Brace for SARB Rate Hike
The Pound South African Rand (GBP/ZAR) exchange rate is trending lower this morning, in advance of the South African Reserve Bank’s (SARB) latest interest rate decision.
At the time of writing the Pound South African Rand exchange rate is trading at around ZAR20.4995, down roughly 0.5% from this morning’s opening rate.
South African Rand (ZAR) Strengthens on SARB Rate Hike Bets
The South African Rand (ZAR) is pushing higher against the Pound (GBP) this morning as markets brace for an expected interest rate hike from the SARB as it concludes its latest policy meeting later this afternoon.
With inflation accelerating both home and abroad, and with South Africa hopefully past the worst of the Covid pandemic, most economists agree that it would be appropriate for the SARB to begin raising its repo rate.
Oxford Economics Africa economist Jee-A van der Linde, comments:
‘Based on the further rise in US inflation, pick up in wages, and the Fed’s hawkish policy pivot, we forecast that the SARB will implement a 25 bps increase in each of the four quarters this year.’
The uptick in the Rand this morning is helping to pare some of the currency’s losses from yesterday evening. ZAR exchange rates fell sharply in the wake of the Federal Reserve’s latest interest rate decision after Fed Chair Jerome Powell signalled US interest rates could rise sharply over the coming year.
While markets had been expecting the Fed to indicate plans to accelerate its monetary tightening, they appeared rattled by Powell’s notably hawkish tone, amidst fears a steeper tightening cycle will negatively impact equity markets.
Pound (GBP) Muted amid Ongoing UK Political Uncertainty
At the same time, the Pound (GBP) continues to struggle to find support this morning as a result of ongoing UK political uncertainty.
GBP investors are still patiently awaiting the publication of Sue Gray’s ‘partygate’ report, which could trigger a vote of no confidence in Boris Johnson, depending on how damaging the revelations from the inquiry are.
Should such action be taken against the Prime Minister it’s likely the Pound could face some considerable headwinds.
Pound South African Rand Exchange Rate Forecast: Geopolitical Uncertainty Still Poses as Risk to ZAR
Looking ahead, the Pound South African Rand (GBP/ZAR) exchange rate could face some volatility in the tail end of this week as the absence of any notable UK and South African economic data leaves the pairing to be driven by external factors.
This could see the Rand undermined by ongoing geopolitical uncertainty, with tensions between the West and Russia over Ukraine likely to limit the upside potential of the emerging market Rand.
Meanwhile, any downside in the Pound could be capped as GBP investors turn their focus towards next week and a likely interest rate hike from the Bank of England (BoE).