Pound South African Rand (GBP/ZAR) Exchange Rate Slips as UK Inflation Climbs to 40-Year High

Pound South African Rand Exchange Rate Dented by Above Forecast Inflation

The Pound South African Rand (GBP/ZAR) exchange rate is trending lower this morning, following the release of the UK’s latest inflation figures.

At the time of writing the GBP/ZAR exchange rate is trading at around ZAR20.4208. Down roughly 0.3% from this morning’s opening rate.

Pound (GBP) Stumbles as UK Inflation Stokes Cost-of-Living Concerns

The Pound (GBP) is on the defensive this morning. A hotter-than-expected UK consumer price index weighing on Sterling sentiment.

According to the Office for National Statistics (ONS), domestic inflation accelerated from 9.9% to 10.1% in September. Beating forecasts and returning inflation to the 40-year high previously hit in July.

A sharp uptick in food prices appeared to underpin the latest rise in inflation. Analysts warn a sharp rise in prices for essential goods could further stretch household incomes.

Jack Leslie, Senior Economist at the Resolution Foundation, comments:

‘Surging food prices have driven a return to double-digit inflation across Britain and high inflation looks set to stay with us for some time too, with accelerating services producer price inflation and the early end of the Energy Price Guarantee likely to put upward pressure on consumer prices next year.

‘This bleak outlook means that family incomes will continue to fall sharply again next year.’

However, the latest jump in inflation is also bolstering expectations for the Bank of England’s (BoE) next interest rate decision.

GBP investors are betting on a bumper rate hike from the BoE in November. Expectations for which are helping to limit the Pound’s losses this morning.

South African Rand (ZAR) Tempered by USD Strength

The South African Rand (ZAR) is struggling to capitalise on the Pound’s weakness this morning. Demand for the emerging market currency is being undermined by a rebound in the US Dollar (USD).

A mixed market mood is helping to revive USD demand this morning, while also weakening the appeal of the risk-sensitive Rand.

South Africa also released its latest CPI figures this morning. Inflation slowed from 7.6% to 7.5% as forecast last month. However with the South African Reserve Bank (SARB) wanting to see it fall back within its target range of 3-6% its having limited impact on the Rand.

Pound South African Rand Exchange Rate Forecast: UK Political Uncertainty Remains Key Risk to Sterling

Turning to the second half of this week, it’s likely UK political uncertainty could infuse fresh volatility into the Pound South African Rand (GBP/ZAR) exchange rate.

Liz Truss’s position as Prime Minister remains tenuous at best, with her leadership potentially coming under even more pressure later today. Reports suggest Conservative rebels are plotting to back a Labour motion to block government fracking plans.

Another setback for the PM is likely to raise fresh questions over her premiership. The resulting political uncertainty potentially pushing Sterling lower.

Meanwhile, the release of South Africa’s latest retail sales figures could drag on the Rand later this afternoon. Economists forecast August’s figures will report another contraction in retail sales growth.

Matthew Andrews

Contact Matthew Andrews

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