Pound South African Rand Exchange Rate Tumbles on SA Optimism
The Pound South African Rand (GBP/ZAR) exchange rate faces notable selling pressure today. The pairing threatening to refresh the one-month low struck on Tuesday.
At the time of writing the GBP/ZAR exchange rate is trading at around ZAR23.2486. Down almost 1% from this morning’s opening rate.
South African Rand (ZAR) Strengthens amid Improving Outlook
The South African Rand (ZAR) enjoys strong support today, with the emerging market currency continuing to build on its recent recovery.
After striking record lows at the start of June, the Rand is buoyant as South Africa’s domestic outlook continues to improve.
The easing intensity of power cuts, an improving outlook for some of South Africa’s key trading partners and the potential side-stepping of the thorny issue of hosting Russian President Vladimir Putin at this year’s BRICS summit.
Further boosting the Rand is the publication of South Africa’s latest retail sales print. ZAR investors welcomed a surprise rebound in sales growth in April.
Pound (GBP) Underpinned by Rebound in UK GDP
While it is on the defensive against the South African Rand, the Pound (GBP) is well supported against the majority of its other peers, following the publication of the UK’s latest GDP figures.
The Office for National Statistics (ONS) reports the UK economy expanded by 0.2% in April. A rebound from the -0.3% contraction recorded in March.
A positive start to the second quarter for the UK economy. Coupled with yesterday’s stronger-than-expected wage growth figures are reinforcing Bank of England (BoE) interest rate hike expectations and boosting the Pound.
Jack Sirett, partner at global financial services firm Ebury, said:
‘The GDP print follows hot on the heels of data showing wages rising at their fastest rate in 20 years outside of the pandemic. It builds into the expectation that not only will the Bank of England be forced into yet another hike next week, but that the peak base rate could reach well above 5%.’
However, tempering the upside in the Pound is a warning that growth in May is unlikely to be as strong, due to strikes and three bank holidays.
Pound South African Rand Exchange Rate Forecast: ZAR to Surge on Dovish Fed Rate Decision?
The Federal Reserve’s impending interest rate decision may see the Pound South African Rand (GBP/ZAR) exchange rate extend its decline.
The US central bank is widely expected to hit pause on its hiking cycle when it concludes its latest policy meeting later this evening.
If the Fed signals this pause will be indefinite, the US Dollar (USD) is likely to plunge. A drop in USD exchange rates, coupled with a more optimistic outlook for global growth is likely to shore up demand for emerging market currencies like the Rand.
Meanwhile, in the absence of any notable UK economic data, any movement in the Pound in the latter half of the week is likely to remain linked to BoE rate expectations.