Pound South African Rand Exchange Rate Buoyed by Cautious Mood
The Pound South African Rand (GBP/ZAR) exchange rate is trading with modest gains this morning as investors shy away from emerging market currencies.
At the time of writing the Pound South African Rand exchange rate is trading at around ZAR23.6503, up roughly 0.2% from this morning’s opening rate.
South African Rand (ZAR) Pressured by US Dollar (USD) Strength
The South African Rand (ZAR) opens on the back foot this morning as emerging market currencies remain pressured by renewed US Dollar (USD) strength.
USD exchange rates jumped on Wednesday, following hawkish comments by Federal Reserve Chair Jerome Powell. Powell stated there is a consensus in the Fed for at least two more interest rate hikes.
The Rand was undermined by both the uptick in USD and the confirmation of more Fed rate hikes. Higher US interest rates are likely to place even more pressure on South Africa’s struggling economy.
This has also reversed a good portion of the Rand’s gains from earlier in the week. ZAR exchange rates had rallied in the wake of the aborted mutiny in Russia over the weekend.
Observers speculate the crisis may lead Russian President Vladimir Putin to miss the in-person BRICS summit in South Africa. Allowing the SA government to sidestep its obligation to arrest him and avoid angering the West.
The Rand could come under further pressure this morning with the release of South Africa’s latest PPI figures. Another drop in producer prices is likely to weaken inflation and dampen South African Reserve Bank (SARB) rate hike bets.
Pound (GBP) Muted as Investors Unnerved by UK Economic Outlook
The Pound (GBP) is struggling to attract support this morning amid growing concern over the UK’s economic outlook.
Speaking on a panel alongside Powell on Wednesday, Bank of England (BoE) Governor Andrew Bailey also struck a hawkish tone. Bailey signalled more tightening will be needed amid ‘clear signs of persistent inflation’.
Bailey’s remarks weakened the Pound yesterday as it reinforced fears the BoE could tighten the UK into a recession.
Furthermore, as Thames Water teeters on the edge of collapse, it is highlighting cracks in the UK’s privatisation model. A government bailout could place even more pressure on public coffers amid the ongoing cost-of-living crisis.
Pound South African Rand Exchange Rate Forecast: UK GDP Figures to Confirm Expansion
Turning to the end of the week, the only data of note will be the UK’s latest GDP release. The finalised figures are expected to confirm the UK economy expanded by 0.1% in the first quarter.
If the GDP figures print as expected the impact on the Pound South African Rand (GBP/ZAR) exchange rate is likely to be negligible. But could a last-minute revision inject some volatility into Sterling?
Meanwhile, any movement in ZAR exchange rates is likely to be tied to market risk appetite. Will a rebound in market sentiment help the Rand recoup some of its losses?