Pound South African Rand (GBP/ZAR) Exchange Rate Weakens amid SARB Rate Hike Bets

GBP/ZAR Exchange Rate Stumbles on SARB Rate Hike Speculation

(Updated: 15:15, 24/8/22) The Pound South African Rand exchange rate is on the back foot this afternoon as ZAR investors continued to digest South Africa’s latest CPI figures

In a slightly delayed response to this morning’s hotter-than-expected inflation print, the Rand has strengthened as ZAR investors price in more rate hikes from the South African Reserve Bank (SARB) this year.

July’s upbeat inflation figures follow on from Tuesday’s jobs figures, which surprised investors by reporting a fall in unemployment in the second quarter.

The Pound, meanwhile, has relinquished its initial strength amid growing concern over the UK’s economic outlook.

Original article continues below:

Pound South African Rand Exchange Rate Firms on Hawkish BoE Rate Hike Expectations

The Pound South African Rand (GBP/ZAR) exchange rate is trading with modest gains this morning. Hawkish Bank of England (BoE) interest rate hike expectations underpin the pairing.

At the time of writing the GBP/ZAR exchange rate is trading at around ZAR20.1513. Up roughly 0.3% from this morning’s opening rate.

Pound (GBP) Buoyed by Forecasts Interest Rates Will Climb to 4%

The Pound (GBP) is strengthening on the back of hawkish BoE rate hike bets this morning.

The uptick in Sterling comes as investors forecast the BoE could raise interest rates to 4% in the first half of 2023 as part of the bank’s efforts to combat surging inflation.

Inflation in the UK is currently at 10.1%, well above the BoE’s 2% target. The BoE has raised interest rates by 165 basis points following six consecutive hikes.

Many analysts have accused the BoE of lagging behind its peers. The BoE hiked rates by 50bps for the first time in almost 27 years this month. While the Federal Reserve is poised to deliver its third consecutive 75bps hike next month.

The prospect of the BoE putting its foot down on the accelerator has been welcomed by GBP investors, despite the risk that more aggressive tightening could tip the UK into a recession.

South African Rand (ZAR) Muted as SA Inflation Soars to 13-Year High

The South African Rand (ZAR) is struggling to find purchase this morning. The release of South Africa’s consumer price index failing to provide much support to ZAR exchange rates.

July’s CPI figures reported domestic inflation jump from 7.4% to 7.8%. Beating forecasts it would only climb to 7.7% and printing at a 13-year high.

The latest jump in inflation may keep the pressure on the South African Reserve Bank (SARB) to hike rates. But  it also raises questions over how the resilience of consumer spending.

ZAR investors are also wary ahead of the start of the Federal Reserve’s Jackson Hole Symposium later this week.

The US central bank may use the annual forum to signal it will maintain its current pace of monetary tightening. The expectation of more aggressive hikes from the Fed is likely to undermine the Rand on fears it will place more pressure on South Africa’s economy.

Pound South African Rand Exchange Rate Forecast: Sterling to be Tempered by Ongoing Economic Uncertainty

The Pound South African Rand (GBP/ZAR) exchange rate may struggle to extend its gains through the second half of the week.

In the absence of any notable data, the focus may return to the UK’s increasingly dour economic outlook. The cost of living crisis is a major concern for GBP investors as are suggestions domestic inflation could reach 18% by next year.

Meanwhile, market risk appetite is likely to shape the direction of the Rand through the latter half of the week.

Expect to see the Rand falter if a risk-off mood prevails in the wake of the Fed’s Jackson Hole Symposium.

Matthew Andrews

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