Pound South African Rand (GBP/ZAR) Exchange Rate Stumbles in Risk-On Trade

Pound South African Rand Exchange Rate Weakens amid Upbeat Mood

The Pound South African Rand (GBP/ZAR) exchange rate is on the defensive this morning as a bullish mood bolsters the appeal of risk-sensitive assets like the Rand.

At the time of writing the GBP/ZAR exchange rate is trading at around ZAR20.8355. Down roughly 0.4% from this morning’s opening rate.

South African Rand (ZAR) Firms in Risk-On Trade

The South African Rand (ZAR) is off to a positive start today. A prevailing risk-on mood is underpinning demand for the emerging market currency.

The upbeat mood appears linked to Chinese economic optimism. Speaking earlier today, the Governor of the People’s Bank of China (PBOC), Yi Gang claimed China’s economy remains on track and the Chinese property market is now stable.

This uptick in the Rand also comes ahead of the Federal Reserve’s upcoming interest rate decision.

The Fed is widely expected to deliver another 75bps interest rate hike later this evening. However there is speculation the US central bank will also signal it plans to pivot and slow the pace of future hikes.

A less hawkish Fed would be welcomed by ZAR investors as it would have to relieve some of the pressure on South Africa’s debt laden economy.

Pound (GBP) Muted amid UK Cost of Living Concerns

The Pound (GBP) is struggling to find support this morning amid fresh concerns over the UK’s cost of living crisis.

Data released by the British Retail Consortium reports UK food inflation is at a record high. After surging 11.6% in October.

Analysts warn the continued rise in essential goods is likely to hit consumer spending through the vital Christmas period.

Andy Clarke, Chairman of Newton Europe, warns:

‘We’re seeing inflation numbers at over double-digit. There’s nothing we can see in the near term that suggests it’s going to go south of that. If anything, it’s going to go up.

‘I think it’s going to be a tough winter, and food inflation is clearly adding to the burden for families.’

Meanwhile, movement in the Pound is also subdued ahead of the Bank of England’s (BoE) interest rate decision on Thursday. Uncertainty over the size of the bank’s next hike leaves some GBP investors reluctant to make any aggressive bets.

Pound South African Rand Exchange Rate Forecast: BoE Rate Decision May Cause Some Volatility

Movement in the Pound South African Rand (GBP/ZAR) exchange rate in the second half of this week looks to be dominated by the BoE’s latest interest rate decision.

Economists forecast the BoE will deliver a 75bps rate hike on Thursday. The acceleration in the bank’s tightening cycle comes after the disruption caused by the previous government’s disastrous mini-budget.

However some analysts warn the BoE may err on the side of caution this month. A delay to the new government’s Autumn Statement means the bank is operating in the dark as to future UK fiscal policy.

If the Bank opts for a more cautious 50bps increase or signals the 75bps increase will be a one-off the Pound is likely to weaken.

In the meantime, the Rand could face some pressure tomorrow morning with the publication of South Africa’s latest PMI figures. October’s release is expected to report growth in the country’s private sector contracted for the second consecutive month.

Matthew Andrews

Contact Matthew Andrews


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