(Updated 16:40 21/04/22)
The Pound South African Rand (GBP/ZAR) exchange rate has skyrocketed today amid a weakened South African Rand. The Rand has struggled amid continued reports of load shedding and a state of disaster amid deadly floods.
Below-forecast inflation figures for South Africa on Wednesday also likely weighed upon the Rand. The figures have lessened expectations of any aggressive rate hikes from the South African Reserve Bank (SARB). A strong US Dollar (USD) may also have helped push the Rand lower today.
At time of writing the GBP/ZAR exchange rate is at around R20.0713, which is up roughly 2.3% from this morning’s opening figures.
Pound South African Rand (GBP/ZAR) Exchange Rate Skyrockets as Eskom Warns of Further Power Cuts
The Pound South African Rand (GBP/ZAR) is soaring today as power shortages persist across South Africa. Continued load shedding this week has weighed on the South African Rand (ZAR) this week. The Pound (GBP) meanwhile is struggling ahead of major speeches from Bank of England (BoE) policymakers this week.
At time of writing the GBP/ZAR exchange rate is at around R19.8444, which is up around 1% from this morning’s opening figures.
South African Rand (ZAR) Nosedives as Power Cuts Continue
The South African Rand (ZAR) is tumbling against its rivals today. Power cuts across SA are denting investor confidence and pulled the Rand lower. ZAR is also struggling today amid a strong US Dollar (USD).
State-owned power utility Eskom announced on Tuesday that it would ramping up its power cuts to ‘Stage 4’ after failures at two of its coal-fired power stations. The ‘load shedding’ is expected to remain in place until Friday at the earliest. Eskom’s actions have routinely affected confidence in the South African economy, and ZAR has suffered throughout the week because of it.
The country’s power grid has come under additional strain following widespread flooding across the country. Nearly 4,000 homes have been destroyed in the Durban area after a week of intense rain and mudslides. 448 people are confirmed to have died as a result of the storms.
Pound (GBP) Dips amid Dovish Tone from BoE
The Pound (GBP) is sliding against many of its rivals today. Sterling fell to a 10-day low against a strong Euro (EUR) as investors seemed focused on Friday’s speech from BoE Governor Andrew Bailey.
The central bank has softened its tone surrounding interest rate hikes in recent months. Alongside other policymakers, Bailey has stated that he is wary of the ‘second-round’ effects of inflation. Bailey has also made clear his fears that too aggressive a series of rate hikes could lead to a wage-price spiral. Inflation in the UK hit its highest point in three decades last week.
Enrique Diaz Alvarez, chief risk officer at Ebury, said:
‘MPC members have sounded dovish on interest rates in recent weeks. However, the blowout inflation report for March, and a near certainty that the April print will be even higher, suggests that the bank won’t be able to hold the line for much longer.’
Sterling may be seeing fresh headwinds this week as confidence in UK Prime Minister Boris Johnson falters further. Following the issuing of fines to Johnson over the ‘partygate’ scandal, opposition MPs are voting today on an investigation into the PM by the Commons privileges committee.
GBP/ZAR Exchange Rate Forecast: Will Bailey Signal Hawkish BoE Turn?
Looking ahead for the Pound, investors will be most keenly awaiting Friday’s speech from BoE Governor Andrew Bailey. The central bank’s tone may remain cautious which may limit gains for Sterling. Hawkish signals from Bailey could see the Pound leap, however.
On Friday, retail sales and private sector output figures for March are expected to fall. This could pull GBP lower if these figures print as forecast and further harm the UK’s long-term economic outlook.
With no significant data left for the Rand this week, the currency may continue to be affected by Eskom’s load shedding actions. Commodity prices could also cause movement in ZAR.