Pound South African Rand Exchange Rate Pressured by Ramping Up of Load Shedding Measures
(Updated 17:00, 14/7/23) The Pound South African Rand (GBP/ZAR) exchange rate shot higher today.
The Rand’s recent winning streak was snapped on Friday as South Africa’s power crisis was thrust back into the spotlight.
State Utility Eskom recently confirmed that the recent ramping up to ‘stage 6’ load shedding measures will need to continue over the weekend amid a sharp drop in temperatures.
Elsewhere, a modest rebound in the US Dollar has also robbed the South African Rand of a key supporting factor behind its recent bullish run.
However the GBP/ZAR exchange rate still close the week lower, as a directionless Pound struggled to capitalise on the Rand’s weakness.
Original article continues below:
Pound South African Rand Exchange Rate Pressured by Bullish Market Mood
The Pound South African Rand (GBP/ZAR) exchange rate is on the defensive this morning. The pairing is trading at a two-week low as an upbeat market mood bolsters the Rand.
At the time of writing the Pound South African Rand exchange rate is trading at around ZAR23.5197. Down roughly 0.3% from this morning’s opening rate.
South African Rand (ZAR) Buoyed by Positive Risk Sentiment
The South African Rand (ZAR) continues to catch bids this morning as the emerging market currency is underpinned by a bullish market mood.
ZAR exchange rates jumped on Wednesday following the publication of the latest US consumer price index.
June’s CPI figures reported headline and core inflation cooled more than expected. This triggered a sharp drop in the US Dollar (USD) and weakened Federal Reserve interest rate expectations.
The Fed is still expected to hike interest rates again later this month. However, any further hikes are now in question.
This comes as a relief to ZAR investors, as higher US interest rates place more pressure on South Africa’s ailing economy.
The USD/ZAR exchange rate subsequently dropped to a two-month low, while also propelling the Rand sharply higher against the Pound and many of its other peers.
A prevailing risk-on mood has helped the Rand consolidate these gains this morning.
Pound (GBP) Buoyed by Stronger-than-Expected UK GDP
The Pound (GBP) is on the back foot against the Rand and many of its more risk-sensitive peers this morning. But Sterling is firming elsewhere, following the publication of the UK’s latest GDP figures
Data published by the Office for National Statistics (ONS) showed the UK economy shrank by 0.1% in May. However, this beat forecasts for a larger 0.3% contraction.
GDP fell 0.1% in May 2023.
▪️ Services were flat (0.0%)
▪️ Production fell 0.6%
▪️ Construction fell 0.2%➡️ https://t.co/Z94htJo1G0 pic.twitter.com/oeYBJNy5id
— Office for National Statistics (ONS) (@ONS) July 13, 2023
The ONS suggested the drop in GDP can be attributed to the extra bank holiday in May.
The uptick in the Pound comes as analysts suggest the drop in GDP won’t be large enough to deter the Bank of England (BoE) from continuing to raise interest rates.
Pound South African Rand Exchange Rate Forecast: Load Shedding to Reverse ZAR Gains?
Looking ahead, the Pound South African Rand (GBP/ZAR) exchange rate could rebound as Eskom begins to ramp up its load shedding measures again.
A cold snap has placed renewed pressure on South Africa’s state utility. Forcing Eskom to impose ‘stage six’ load shedding.
This load shedding has caused major disruption to South Africa’s economy in recent months. And a ramping up of these power cuts is likely to spook ZAR investors.
Meanwhile, with UK data thin on the ground through the remainder of the week, any movement in the Pound may be driven by BoE rate speculation. Will bets on another 50bps hike in August help to underpin Sterling sentiment?