Pound South African Rand (GBP/ZAR) Exchange Rate Strikes Seven-Year High after UK GDP Data
(Updated 08:48 12/05/20230
The Pound South African Rand exchange rate is at a seven-year high this morning. The pairing may be strengthening off the back of evidence of a 0.1% first quarter expansion in the UK’s economy.
The GDP-motivated gains may be limited by a surprise March contraction, however. March’s GDP fell by 0.3% versus the expected stagnation.
Speaking on the data, ING’s Developed Markets Economist James Smith said:
‘Ultimately, the recent figures have been thrown around by several one-off factors, ranging from the Queen’s funeral last year, to strikes and even some knock-on effect from the World Cup at the end of last year.’
GBP/ZAR may also be making gains amid fears of a deepening load shedding crisis in South Africa. State power utility Eskom is now forecasting permanent stage 6 power cuts over the winter. Experts also foresee the use of intermittent stage 8 and 9 measures.
At time of writing the GBP/ZAR exchange rate is at around ZA24.3429, which is up roughly 1.5% from this morning’s opening figures.
Pound South African Rand (GBP/ZAR) Exchange Rate Strengthens amid Load Shedding Fears
(Updated 16:46 11/05/23)
The Pound South African Rand (GBP/ZAR) exchange rate is trading at a three-year high this afternoon amid fears of a collapse in South Africa’s power grid.
South African investors are becoming concerned of a large-scale collapse in the country’s power grid amid persistent power cuts.
Erik Meyersson, the chief emerging-markets strategist at SEB AB in Stockholm, said:
‘The power crisis and the associated load shedding means the economy is at risk of stagnation with severe bottlenecks overall in infrastructure and through supply chains.’
The exchange rate’s gains could be tempered by dovish comments from Bank of England (BoE) Governor Andrew Bailey following the central bank’s interest rate decision. Bailey forecast that UK inflation would cool quicker than previously forecast.
At time of writing the GBP/ZAR exchange rate is at around ZA23.9374, which is up around 0.6% from this morning’s opening figures.
Pound South African Rand (GBP/ZAR) Exchange Rate Climbs in Wake of BoE Rate Hike
(Updated 12:28 11/05/23)
The Pound South African Rand exchange rate is making steady gains today. The rise in the pairing is likely being driven by the Bank of England’s (BoE) interest rate hike.
The central bank raised interest rates by 25bps, and indicated that additional tightening would be considered if incoming data pointed to underling inflationary pressures. These hawkish signals may be lifting the pair.
Faisal Islam, Economics Editor at BBC News, said:
‘The bottom line here is that this is a recipe for at least a further rate rise next month. As well as increasing interest rates 12 times now to an almost 15-year high, the Bank of England has outlined the foothills of economic recovery starting this summer.’
Alongside the hike, the BoE also revised their growth forecasts for the UK higher. The central bank now expects the UK to avoid a 2023 recession which may also be boosting GBP/ZAR today.
At time of writing the GBP/ZAR exchange rate is at around ZA23.9167, which is up roughly 0.5% from this morning’s opening figures.
Original article continues below:
Pound South African Rand (GBP/ZAR) Exchange Rate Holds Steady as Markets Wait for BoE Meeting
The Pound South African Rand exchange rate is trading in a narrow range today. Movement in the pairing is likely muted ahead of the Bank of England’s interest rate decision.
The exchange rate may be finding support from further load shedding woes in South Africa. The prospect of a 25bps rate hike from the BoE may also be underpinning GBP/ZAR.
At time of writing the GBP/ZAR exchange rate is at around ZA23.8083, which is virtually unchanged from this morning’s opening figures.
Pound (GBP) Subdued ahead of BoE Interest Rate Meeting
The Pound (GBP) is edging lower today ahead of the BoE’s interest rate decision. Sterling may be finding support from an upbeat market mood, however.
The UK’s central bank is largely expected to hike interest rates by 25bps later today. Some economists are expecting today’s hike to be the BoE’s last in the current cycle. Others anticipate additional tightening over the coming months.
Forecasts released today by economic think-tank National Institute of Economic and Social Research (NIESR) gave credence to predictions of extended policy tightening from the BoE. NIESR estimated that inflation in the final quarter of 2023 would be around 5.4%
Francesco Pesole, Frantisek Taborsky, and Chris Turner had the following analysis of the BoE’s potential forward path:
‘We think markets have got ahead of themselves, and today’s 25bp hike (7-2 vote split, two members voting for no change) may well be the last one in this cycle. The main reasoning behind our conclusion is that the drivers of higher-than-projected inflation have primarily been food prices and some surprising stickiness in core goods inflation: neither of those trends look likely to be long-lasting.’
South African Rand (ZAR) Treads Water Near Three-Year Lows amid Load Shedding Woes
The South African Rand (ZAR) is trading close to three-year lows against its peers today. Persistent load shedding woes are likely damaging confidence in the resilience of ZAR and the South African economy.
Amid multiple generator failures, state power utility Eskom announced that it would need an additional 45 days to restore full capacity in some areas.
Kieran Siney, the co-head of financial markets at ETM Analytics, underlined the impact of Eskom’s mismanagement on the Rand:
‘Until there is a concrete plan to resolve South Africa’s energy crisis that the market buys into, the underperformance will persist, notwithstanding the attractive yields on offer and deep undervaluation in the ZAR.’
GBP/ZAR Exchange Rate Forecast: Will Hawkish BoE Signals Push Pound Higher?
With the expected 25bps rate hike from the BoE already largely priced in by markets, the rate hike could have little impact on Sterling.
Investors will instead by looking to any forward guidance issued alongside the decision. Hints of additional rate hikes over the coming months could see GBP leap.
Friday’s GDP figures could also bolster the Pound if they print as forecast. The UK’s economy is expected to have expanded by 0.1% in the first quarter of 2023. Signs that the UK may avoid a 2023 recession could also improve market confidence in the country’s economic recovery.
For the South African Rand, private sector output data later this morning could pull ZAR lower if it prints as forecast. March’s mining production is set to decline by 4.3, only slight up from February’s 4.9% drop.
Additionally, output in South African’s industrial sector is set to drop by 0.4% in March. These figures could also keep pressure on ZAR.
Further load shedding may add to the negative outlook for the South African Rand this week.