Pound South African Rand (GBP/ZAR) Exchange Rate Soars as FATF Grey Listing Confirmed
(Updated 09:45, 24/02/23) The Pound South African Rand (GBP/ZAR) is rocketing this morning, following the news that the FATF has grey listed South Africa.
The financial crimes watchdog was in the process of reviewing South Africa, and this morning announced it would be adding the country to the grey list.
In doing so, South Africa has been dealt a serious reputational blow, which has prompted ZAR to plummet.
At the time of writing, GBP/ZAR is trading around ZAR22.0577, a jump of roughly 0.8% from the morning’s opening rates.
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Pound South African Rand (GBP/ZAR) Exchange Rate Rallies as South Africa Could Face FATF Grey Listing
The Pound South African Rand (GBP/ZAR) exchange rate is rallying this morning. Warnings that South Africa could be added to the Financial Action Task Force’s (FATF) grey list are erasing ZAR’s gains.
At the time of writing, GBP/ZAR is trading around ZAR22.0529, a rise of roughly 0.5% from the morning’s opening rates.
South African Rand (ZAR) Sinks amid FATF Grey List Warning
After an initial post-budget rally, the South African Rand (ZAR) is taking a tumble this morning, following news that the FATF may add South Africa to it’s grey list.
Initially, the news that the South African Government was to absorb half of energy supplier Eskom’s debt cheered ZAR investors. Eskom’s financial troubles have led to mass waves of load shedding across the country, severely hampering the South African economy.
While the budget was initially met with cheer, the Rand seems unable to consolidate these gains. The Financial Action Task Force (FATF), a global watchdog which sets standards on combating financial crimes, could add South Africa to it’s ‘grey list’.
Enoch Godongwana, Minister of Finance, stated:
‘We recognise the need to be more effective in implementing our laws, particularly in fighting organised and sophisticated crimes. Addressing the FATF issues is part of the broader fight against corruption, crime, state capture and the deliberate weakening of the institutions of law and order in our country.’
If the Rand is added to this list, it’ll be a serious reputational blow for South Africa, and may weigh heavily on local asset prices.
Pound (GBP) Underpinned by Hawkish BoE Speech
The Pound (GBP) is trading narrowly this morning, as domestic headwinds are countered by interest rate hike hopes.
Speaking this morning, Catherine Mann – a Bank of England (BoE) policymaker – restated the need for further tightening. Mann stated:
‘Financial conditions are now looser than what likely will be needed to moderate the embedding of ongoing inflation into the wage- and price-setting paths. More tightening is needed, and a pivot is not imminent.’
As such, GBP investors may be moving to bet on further tightening. These bets are likely meeting domestic headwinds, with vegetable shortages continuing across the UK.
Further weighing on GBP could be Brexit issues. The Northern Ireland Protocol has been the subject of intense negotiations this week, but PM Sunak now faces further pressure from his own party and the DUP. With this in mind, investors could be worried that the talks may lose momentum, keeping Sterling downbeat.
Pound South African Rand (GBP/ZAR) Exchange Rate Forecast: BoE Tenreyro to Dent GBP?
Looking ahead for the Pound, Bank of England (BoE) policymaker Silvana Tenreyro is scheduled to speak on Friday. With Tenreyro being a firmly dovish member of the monetary policy committee, her speech could weigh on Sterling. As an advocate for softer monetary policy, her speech could dent GBP.
However, due to a lack of data releases domestic headlines may be the main focus for investors. With fruit and vegetable shortages beginning to occur across the UK, and industrial action continuing, the dour domestic mood may weigh on GBP.
For the South African Rand, data releases are thin on the ground. As such, ZAR investors may continue to pore over the recent Budget.