Pound South African Rand Exchange Rate Nosedives as SARB Shocks with 75bps Rate Hike

GBP/ZAR Exchange Rate Plummets on SARB Rate Decision

(Updated: 14:40, 21/7/22) The Pound South African Rand exchange rate is in a tailspin this afternoon, following the SARB’s interest rate decision.

The SARB shocked markets by raising interest rates by 75bps. The bank’s steepest hike in almost two decades.

https://mobile.twitter.com/SAReserveBank/status/1550108340839071746

ZAR investors welcomed the larger-than-expected hike on hopes it will help prevent the Rand from being devalued by increasingly aggressive rate hikes from the US Federal Reserve.

Meanwhile, the Pound is struggling to attract support amid ongoing political uncertainty and a souring market mood.

Original article continues below:

Pound South African Rand Exchange Rate Firms Ahead of SARB Rate Decision

The Pound South African Rand (GBP/ZAR) exchange rate is trading with modest gains this morning. As ZAR investors are cautious ahead of the South African Reserve Bank’s (SARB) latest interest rate decision.

At the time of writing the GBP/ZAR exchange rate is trading at around ZAR20.5442. Up roughly 0.3% from this morning’s opening rate.

South African Rand (ZAR) to Rally on Hawkish SARB Rate Hike?

The South African Rand (ZAR) is on the back foot this morning as ZAR investors brace for the SARB’s impending interest rate decision.

The Rand slumped on Wednesday following the release of the South Africa’s consumer price index. June’s index reporting inflation soared to a 13-year high of 7.4%. Propelling inflation well above the upper limits of the SARB’s 3-6% target range.

Given the heightened inflation risks, an interest rate hike from the SARB this afternoon seems inevitable. However, the key question is how aggressively the bank might raise rates.

Consensus forecasts suggest the SARB will deliver its second consecutive 50bps rate hike this month. After delivering its first half-percentage rate increase in over six years in May.

However some economists suggest there is an outside chance of a larger rate hike this month. The bank’s monetary policy committee is thought to be split between a 50bps and 75bps hike.

A surprise 75bps rate hike from the SARB could trigger a sharp appreciation in the Rand.

Pound (GBP) Wavers amid UK Political Uncertainty

While the Pound (GBP) is trending higher against the Rand this morning, the currency is struggling to replicate this success against its other peers amid a souring market mood.

Adding to the pressure on Sterling is ongoing political uncertainty. The Conservative leadership race is now in its final leg as Rishi Sunak faces Liz Truss in a six-week battle to win over Tory party members.

The last round of the leg is expected to see the pair engage in a bitter fight for the leadership.

However expectations the Bank of England (BoE) might deliver a 50bps hike next month are helping to cap the Pound’s losses this morning.

Pound South African Rand Exchange Rate Forecast: Slump in UK Retail Sales to Drag on Sterling?

The Pound South African Rand (GBP/ZAR) exchange rate may stumble at the end of this week, with the publication of the UK’s latest retail sales figures.

Sales growth if forecast to have contracted for the second consecutive month in June. Likely highlighting the impact the cost of living crisis is having on consumer spending and raising fresh concerns over the trajectory of the UK economy.

Any downside in Sterling may be reinforced by the release of the UK’s latest PMI figures. July’s preliminary releases are expected to show activity in the manufacturing sector and services sector slowed.

Meanwhile, a lull in notable ZAR economic data, might see the Rand driven primarily by market sentiment on Friday. Will a souring mood leave the emerging currency on the back foot?

Matthew Andrews

Contact Matthew Andrews


Related
Do Not Sell My Personal Information