Pound South African Rand (GBP/ZAR) Exchange Rate Climbs as Risk Attitude Retreats

(Updated 16:55 24/02/22)

The Pound South African Rand (GBP/ZAR) exchange rate has made steady gains today as investors dump riskier assets. The volatile risk attitude in the markets is likely a result of the Russian invasion of Ukraine.

At time of writing the GBP/ZAR exchange rate is at R20.6347, which is up around 0.7% from this morning’s opening figures.

Pound South African Rand (GBP/ZAR) Exchange Rate Trades Narrowly as Russia Crosses Ukrainian Border

The Pound South African Rand (GBP/ZAR) exchange rate remained rangebound today amid a volatile risk attitude in the markets. A rally in commodity prices following the Russian invasion of Ukraine likely boosted the South African Rand (ZAR), placing downward pressure on the pair.

At time of writing the GBP/ZAR exchange rate is at around R20.4582, virtually unchanged from this morning’s figures.

South African Rand (ZAR) Boosted by Surge in Commodity Prices

The South African Rand (ZAR) edged higher against many of its rivals today despite seeing some large losses overnight. Geopolitical uncertainty following the Russian invasion of Ukraine has seen a rally in commodity prices, likely aiding the emerging currency.

The Rand may also be boosted after an upbeat budget forecast for 2022 delivered on Wednesday. Finance Minister Enoch Godongwana stated that he expected the country to achieve a budget surplus by 2024, much earlier than previously anticipated. Growth forecasts were also optimistic, with forecasts for 2022 revised from 1.8% up to 2.2%.

Strong gains for commodity prices likely helped boost ZAR as well. Gold prices jumped to their highest point in more than a year. The price of crude oil also skyrocketed topping $100 for the stime since 2014.

Pound (GBP) Drops as Russian Forces Cross into Ukraine

The Pound (GBP) dropped against the majority of its competitors today. A risk-off trading mood has remained prevalent throughout the markets. This comes after reports on Thursday morning of a full-scale military offensive by Russia into Ukraine. The geopolitical instability likely weighed upon Sterling.

Vladimir Putin announced a ‘special military operation’ at around 5am Ukrainian time. Shortly after the announcement, reports came in of explosions near major Ukrainian cities. Ukraine’s interior ministry stated that the scale of the offensive appeared to be massive.

Western leaders are worried that the military action could lead to some of the worst fighting in Europe since the Second World War. Both the UK & US have promised further economic sanctions against Russia in the days to come. The EU unveiled its package of sanctions on Wesdnesday.

Significant losses for the Pound could be limited over the course of the day by expectations of a rate hike from the Bank of England (BoE). Speaking in front of a parliamentary committee on Wednesday, multiple BoE officials sought to temper these hopes however. This in turn may have reduced bets on Sterling.

Multiple members of the BoE’s Monetary Policy Committee (MPC) also spoke of more dovish ‘modest tightening’. Governor Andrew Bailey stated that the risk of inflation were clear but that the markets should temper expectations of a large rate hike. The central bank has been accused of mixed messaging in the past. The International Monetary Fund recently warning the BoE of the need for clear communication.

GBP/ZAR Exchange Rate Forecast: Will Bailey Continues BoE’s Dovish Turn?

Looking to the week ahead for the UK, a speech by BoE governor Andrew Bailey on Thursday could help bolster Sterling should he signal a more hawkish stance from the central bank. Based on comments made this week however, a dovish turn from Bailey could pull GBP down.

Additionally, February’s distributive trades figures released on Thursday could see Sterling dip should they fall as forecast.

With no significant data for the rest of the week, the South African Rand is likely to continue to be affected by commodity prices and global risk appetite.

Gareth Monk

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