Pound South African Rand Exchange Rate Rebounds Following SARB Rate Decision
(Updated 14:30, 20/7/23) The Pound South African Rand (GBP/ZAR) exchange rate turned positive this afternoon. The pairing having shed its losses from earlier this morning, as the South African Reserve Bank delivered its latest interest rate decision.
As expected, the SARB left rates on hold at 8.25% following its July meeting.
The Monetary Policy Committee decided to keep the repurchase rate at its current level of 8.25% per year, with effect from 21 July 2023. #SARBMPCJuly23 pic.twitter.com/W2MXBQGGKZ
— SA Reserve Bank (@SAReserveBank) July 20, 2023
While the SARB noted there are still ‘upside risks’ to its inflation outlook, it stressed any future decisions will be ‘data dependent’. The dovish outlook was seen as a sign that the SARB’s current hiking cycle has now come to an end.
Applying further pressure to the South African Rand this afternoon is robust demand for the US Dollar (USD), following the publication of stronger-than-expected US data.
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Pound South African Rand Exchange Rate Stumbles in Advance of SARB Rate Decision
The Pound South African Rand (GBP/ZAR) exchange rate remains on the back foot this morning, with the pairing trading at a two-month low.
At the time of writing the Pound South African Rand exchange rate is trading at around ZAR23.0113. Down roughly 0.3% from this morning’s opening rate.
South African Rand (ZAR) to Weaken on SARB Rate Pause?
The South African Rand (ZAR) may face some pressure later today as the South African Reserve Bank (SARB) delivers its latest interest rate decision.
The SARB is expected to leave rates on hold at 8.25% this month. The bank will announce its rate decision at 14:00 BST.
WATCH LIVE: Governor @KganyagoLesetja will deliver the MPC statement today at 15:00. The press conference will be live-streamed on Facebook https://t.co/jkqyCWw0wv & YouTube https://t.co/8Ztcngcgvx. Alternatively, watch on local news channels. Use #SARBMPCJULY23 pic.twitter.com/353MTyNN96
— SA Reserve Bank (@SAReserveBank) July 20, 2023
The decision could see the Rand relinquish some of its recent strength. Particularly if the bank signals its tightening cycle has run its course.
Speculation of an end to the SARB’s hiking cycle is supported by yesterday’s Inflation figures. Domestic inflation was shown to have fallen to 5.4% in June. Returning it to the SARB’s target range for the first time in over a year.
However, some analysts still believe there is scope for further tightening from the SARB. The Pound South African Rand exchange rate is likely to test new lows if the bank surprises markets with a hike this afternoon.
In the meantime, the Rand appears to continue to draw support from yesterday’s announcement that Russian President Vladimir Putin will not attend next month’s BRICs summit in Johannesburg. Allowing the SA to dodge a potentially thorny issue.
As a signatory of the International Criminal Court (ICC) South Africa would have been expected to arrest Putin upon his entry into the country. Refusal to do so could have threatened its economic ties with the West.
Pound (GBP) Remains Suppressed by BoE Repricing
The Pound (GBP) in contrast, is licking its wounds this morning, following a sharp correction in GBP exchange rates during yesterday’s session.
Sterling nosedived on Wednesday in the wake of the UK’s own inflation figures. June’s weaker-than-expected inflation print sparked a major repricing of Bank of England (BoE) rate hike bets.
GBP investors now believe a 50bps rate hike in August is likely to be off the table, and that rates will ultimately not peak above 6%.
Pound South African Rand Exchange Rate Forecast: Upbeat Sales Growth to Lift GBP?
Looking past the SARB rate decision to the end of the week. The Pound South African Rand (GBP/ZAR) exchange rate could find some respite with the publication of the UK’s latest retail sales figures.
Consensus forecasts predict UK sales growth will have slowed slightly from 0.3% to 0.2% in June. However last month’s exceptionally good weather could have led to families splurge a little.
Any signs of resilient consumer spending could shore up BoE rate hike bets and lift the Pound.
Meanwhile, with local temperatures rising, pressures on South Africa’s power grid should be falling. This should allow Eskom to avoid ramping up its load shedding measures and offer further support to the Rand.