GBP/ZAR Exchange Rate Steady as Investors Await SARB Policy Decision
(Updated: 16:30, 25/01/23) The Pound South African Rand exchange rate continues to trade sideways this afternoon as market brace of the South African Reserve Bank’s (SARB) latest interest rate decision.
WATCH LIVE: Governor @KganyagoLesetja will deliver the MPC statement on Thursday, 26 January at 15:00. The press conference will be live-streamed on Facebook https://t.co/jkqyCWw0wv & YouTube https://t.co/8Ztcngcgvx. Alternatively, watch on local news channels. Use #SARBMPCJan23 pic.twitter.com/7nMNXSn8io
— SA Reserve Bank (@SAReserveBank) January 25, 2023
ZAR investors appear reluctant to make any bullish bets ahead of the decision. Which is likely to see the SARB raise rates by 50bps to 7.5%.
While the SARB’s monetary tightening has generally kept pace with the other major central banks, its widely expected to signal Thursday’s hike will be its last for some time.
Meanwhile, the Pound has seen some positive but modest movement this afternoon. However a lack of a clear catalyst for the move raises questions whether Sterling will be able to sustain these gains through the latter half of the week.
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Pound South African Rand Exchange Rate Muted on OBR Warning
The Pound South African Rand (GBP/ZAR) exchange rate is rangebound this morning as the UK’s spending watchdog warns the domestic growth continues to deteriorate.
At the time of writing the GBP/ZAR exchange rate is trading at around ZAR21.1701. Virtually unchanged from this morning’s opening rate.
Pound (GBP) Rangebound as UK Growth Outlook May be Revised Lower
The Pound (GBP) is struggling to attract support this morning amid concerns over UK economic growth.
Sterling sentiment is weakening after the Office for Budget Responsibility (OBR) reportedly told Chancellor Jeremy Hunt its previous medium-term growth outlook may have been too optimistic.
The OBR previously forecast the UK economy would shrink by 1.4% in 2023, before returning to growth with a 1.3% expansion in 2024.
However The Times reports the OBR will slash these forecasts by up to 0.5%. The spending watchdog has cited underlying economic weakness and labour shortages as driving the larger-than-expected decline.
The downgrade to growth could complicate Hunt’s jobs as he prepares to deliver his spring budget on 15 March. It’s estimated the revision could wipe as much as £9.2bn from the government’s coffers. Severely limiting any scope for growth boosting tax cuts, to the dismay of GBP investors.
On a more positive note however, the OBR sees the UK’s current recession as being ‘shallower and shorter’ than previously forecast.
South African Rand (ZAR) Subdued amid Ongoing Eskom Uncertainty
The South African Rand (ZAR) is also facing an uphill battle this morning. Investors remain wary of the Rand as South Africa’s power crisis continues to disrupt economic activity.
State utility Eskom has given conflicting messages on the outlook for scheduled power cuts, also known as load shedding.
Earlier this week appeared to suggest load shedding measures may need to remain in place for up to two years, before hastily backtracking.
Eskom CEO André de Ruyter has now hinted that load shedding could be reduced from March. However the confusion over Eskom’s messaging is doing little to ease ZAR investors’ concerns.
Pound South African Rand Exchange Rate Forecast: ZAR to Weaken if SARB Signals End to Rate Hikes?
The Pound South African Rand (GBP/ZAR) exchange rate may strengthen on Thursday as the South African Reserve Bank (SARB) concludes its first policy meeting of 2023.
The SARB is widely expected to deliver a 50bps interest rate hike this month. But with the increase largely priced in the hike itself could have limited impact on the Rand.
Instead, the focus will be on the SARB’s forward guidance. If the bank signal’s it will pause its tightening cycle following this month’s hike – as many economists predict – its likely ZAR exchange rates could tumble.
Meanwhile the Confederation of British Industry’s (CBI) latest distributive trades index could weigh on the Pound tomorrow. January’s index is forecast to report a decline in UK retail volumes, potentially stoking recession fears.