Pound South African Rand (GBP/ZAR) Exchange Rate Soars to One-Month High

GBP/ZAR Exchange Rate Extends Gains on BoE Rate Hike Bets

(Updated: 16:45, 14/9/22) The Pound South African Rand exchange rate remains on the front foot this afternoon, the pairing appreciating by around 0.7% to strike a new one-month high.

The uptick in GBP/ZAR appears driven primarily by BoE rate hike bets. The latest bump in core UK inflation is fuelling expectations the BoE will continue raising interest rates into 2023.

Meanwhile the Rand is giving ground this afternoon following the publication of South Africa’s latest retail sales.

July’s figures reported another contraction of sales growth. A weak start to the third quarter raised fears South Africa could be at risk of a recession.

Original article continues below:

Pound South African Rand Exchange Rate Firms on UK CPI Release

The Pound South African Rand (GBP/ZAR) exchange rate is ticking higher this morning, in response to the latest UK inflation figures.

At the time of writing the GBP/ZAR exchange rate is trading at around ZAR20.0931. Up roughly 0.2% from this morning’s opening rate.

Pound (GBP) Buoyed by Mixed UK Inflation Figures

The Pound (GBP) is strengthening today as market react to the UK’s consumer price index.

August’s CPI release reported headline inflation unexpectedly slowed from 10.1% to 9.9%. Missing forecasts it would tick up to 10.2%.

On the other hand, the core release revealed underlying inflation continued to accelerate. Climbing to a new 30-year high of 6.3%.

The relatively modest uptick in the Pound reflects a mixed assessment of the inflation release. With Analysts split on what the latest inflation figures mean for the Bank of England (BoE).

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, appears confident that the fall in headline inflation could relive pressure on the BoE:

‘This relatively benign medium-term outlook for CPI inflation should convince the MPC that they do not need to strangle the economy by raising Bank Rate all the way to 4%, as markets currently anticipate.’

However James Smith, developed markets economist at ING, suggests ‘policymakers are more interested in core inflation’, indicating the bank may need to act more forcefully to prevent inflation from becoming embedded.

South African Rand (ZAR) Remains Pressured by US Fed Rate Hike Bets

The South African Rand (ZAR) continues to link its wounds today, after the currency took a battering on Tuesday.

ZAR exchange rates plunged in the wake of the latest US CPI release after US inflation printed above forecast in August.

The stronger-than-expected headline figures and uptick in core inflation stoked Federal Reserve rate hike bets. Cementing expectations for another 75bps rate hike next week.

The prospect of the US central bank maintaining its aggressive monetary policy rattled markets yesterday. ZAR investors fear that higher US interest rates could pile even more pressure on South Africa’s debt laden economy.

Pound South African Rand Exchange Rate Forecast:  SA Retail Sales to Apply Additional Pressure on ZAR?

The publication of South Africa’s latest retail sales figures could allow the Pound South African Rand (GBP/ZAR) exchange rate to extend its gains later this afternoon.

Economists forecast sales growth will have contracted for a third consecutive month in July. A poor start to the third quarter could raise fears the country could slip into a recession sooner rather than later.

Meanwhile the publication of the UK’s own retail sales release could act as a drag on the Pound later in the week.

Friday’s figures are forecast to report sales growth contracted 0.5% in August. Adding to the bleak outlook for the UK economy.

Matthew Andrews

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