Pound South African Rand (GBP/ZAR) Exchange Rate Rangebound as Markets Digest SARB Decision

Pound South African Rand (GBP/ZAR) Exchange Rate Slumps as Markets Reprice ZAR

(Updated 16:40 26/05/23)

The Pound South African Rand (GBP/ZAR) exchange rate is tumbling today. The pairing’s downturn may be being driven by a repricing of the South African Rand (ZAR) following its record-lows earlier in the week.

Speaking on the Rand’s shifts, Greg Davies of Cratos Capital said:

‘Yesterday’s move may have been overdone. It seems the market is settling down away from the panicked move we had yesterday to more realistic levels.’

Any further losses for GBP/ZAR could be being prevented by the earlier above-forecast UK retail sales figures.

At time of writing the GBP/ZAR exchange rate is at around ZAR24.1828, which is down roughly 0.7% from this morning’s opening figures.

Original article continues below:

Pound South African Rand (GBP/ZAR) Exchange Rate Trends Sideways after Rand’s Nosedive

The Pound South African Rand exchange rate is trading in a narrow range today. Dip-buying of a beleaguered South African Rand may be preventing the pairing from climbing higher.

On the other hand, an above-forecast rise in UK retail sales may be limiting any drastic losses for GBP/ZAR.

At time of writing the GBP/ZAR exchange rate is at around ZAR24.3729, which is virtually unchanged from this morning’s opening figures.

South African Rand (ZAR) Edges Higher from Record-Lows after SARB Rate Hike

The South African Rand (ZAR) is recouping its losses today after dropping overnight. ZAR continued to tumble after the South African Reserve Bank’s (SARB) interest rate decision on Thursday.

The Rand struck record lows on Thursday following the SARB’s 50bps interest rate hike. The downturn may have been motivated by market expectations of 75bps increase. Additionally, comments from SARB officials indicating further weakness in the Rand may have weighed on the currency.

Speaking on the central bank’s decision, SARB Governor Lesetja Kganyago said:

‘The medication might be bitter, but if the patient does not take the medication they will end up in surgery and in intensive care.’

Kganyago highlighted the continued impact of rolling blackouts on the country’s economic recovery and growth.

The prospect of further load shedding from state power utility could be limiting the Rand’s recovery today. Stage 4 and 5 load shedding is expected over the rest of this week.

Pound (GBP) Lifted by Retail Sales Rebound

A surprise rebound in UK retail sales may be causing the Pound (GBP) to firm today. A risk-on impulse may also be lending support to Sterling today.

April’s retail sales volumes increased by 0.5% versus the forecast growth of 0.3%. Inflation-fuelled price rises seemed to have little effect on consumer demand last month. Better weather in April also helped sales rebound from March’s lows. The figures also added to hopes that the UK will avoid a recession this year.

The figures did bring some cause for caution, however. The data outlined the ongoing impact of persistently high inflation, with consumers paying more for fewer overall items. Food prices in the UK have continued to hit fresh highs.

GBP may also be seeing a lift from indicators that the Bank of England (BoE) will continue to hike interest rates in the near future.

GBP/ZAR Exchange Rate Forecast: Will Additional Load Shedding Keep Pressure on ZAR?

The coming week will see a sparse data calendar for the currency pair. The South African could see losses on Wednesday if April’s trade figures following previous months’ trends. The country recorded a below-forecast trade surplus in March and was a notable decline from February’s figures.

Thursday will bring figures for South Africa’s manufacturing sector. May’s PMI is set to print at 50 up from 49.8 in April. The forecast return to growth for the sector could push ZAR higher. On the other hand, any evidence of the continued impact of load shedding in the surveys could cap any gains for the Rand.

The Pound could see some movement off the back of final manufacturing sector output figures on Thursday. The final reading of May’s PMI for the sector is set to confirm a fourth consecutive month of declines. If the reading prints as expected, then Sterling could face losses.

Aside from the PMI figures, BoE rate hike bets could inspire further shifts in GBP over the coming week. If markets price in additional tightening, then it could bolster the currency.

Gareth Monk

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