Pound South African Rand (GBP/ZAR) Exchange Rate Soars as Truss Announces UK Support Plans

Pound South African Rand (GBP/ZAR) Exchange Rate Buoyed by Announcement of UK Energy Cost Support

(Updated 16:20 08/09/22)

The Pound South African Rand (GBP/ZAR) exchange rate continued to climb today. The currency pair likely saw gains off the back of the reveal of the long-awaited energy cost support package for UK households and businesses. UK Prime Minister Liz Truss outlined the measures in the Houses of parliament earlier today, including a freeze on energy bills to limit costs to roughly £2500 annually.

An extensions of stage 2 load shedding in South African may have also bolstered GBP/ZAR today. State power utility Eskom announced that load shedding would continue throughout Thursday night due to preserve energy storage levels.

At time of writing the GBP/ZAR exchange rate is at around R20.1001, which is up roughly 1.1% from this morning’s opening figures.

Original article continues below:

Pound South African Rand (GBP/ZAR) Exchange Rate Firms ahead of Truss Energy Support Announcement

The Pound South African Rand (GBP/ZAR) exchange rate is edging higher today. Further load shedding and downbeat consumer confidence figures for South Africa may be boosting the currency pair. The expected announcement of UK energy support plans later today may also be lending support to GBP/ZAR.

On the other hand, gains for the pair could be capped by fears over an imminent recession for the UK.

At time of writing the GBP/ZAR exchange rate is at around R19.9141, which is up roughly 0.2% from this morning’s opening figures.

Pound (GBP) Climbs against Rand despite Increased Possibility of UK Recession

The Pound (GBP) is dropping against many of its competitors today, hitting close to 37-year lows against the US Dollar (USD). The currency is making gains against the South African Rand, however.

Recession fears are likely contributing to Sterling’s losses today. Investors are concerned that planned heavy borrowing to pay for a freeze on energy bills could add to inflation in the medium-term.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said:

‘But warnings from the Bank of England are loud and clear, the UK won’t be able to avoid a recession, so the best case scenario is for now is that the troubled waters ahead are shallow and not deep.’

Reports indicate that Truss is set to announce her energy plan at 11:30 BST.

On the other hand, bets on interest rate action from the Bank of England (BoE) may be helped to curb significant losses for GBP today. Investors will be awaiting the European Central Bank’s (ECB) decision later today for evidence that the BoE may follow suit.

South African Rand (ZAR) Falls as Further Load Shedding Expected

The South African Rand (ZAR) is slipping today. A drop consumer confidence is likely weighing on the Rand. On the other hand, a risk-on appetite and optimism amongst businesses may be limiting major losses for the currency today.

Whilst third quarter figures indicated an improvement to consumer confidence, the index still printed at -20. The reading indicates that consumer sentiment remains extremely negative as inflation continues to soar.

Wednesday’s business confidence figures may help to counteract the negative sentiment generated by the consumer figures, however. Despite a slight dip, business confidence for the third quarter fell by less than forecast. Economists believe a third quarter contraction to SA GDP is now unlikely.

The announcement earlier this week that the country will see widespread stage 2 load shedding may also be pushing ZAR lower today. The announcement came hours after the release of second quarter GDP figures showing a contraction due, in part, to load shedding.

GBP/ZAR Exchange Rate Forecast: Will Truss’ Energy Support Plan Bolster Sterling?

The Pound will see no further significant data over the remainder of the week. The currency could see a boost if UK PM Liz Truss announces the widely anticipated energy support package later today.

Expectations of further interest rate hikes from the Bank of England could also bolster Sterling in the coming days.

The South African Rand is also set to see no other significant data this week. The implementation of any additional load shedding could dent confidence in the Rand if the country’s power grid continues to struggle.

Ongoing strength in the US Dollar and bets on interest rate hikes from the US Federal Reserve could also push ZAR lower.

Gareth Monk

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