Pound South African Rand Exchange Rate Buoyed in Upbeat Trade
(Updated 14:00, 27/7/23) The Pound South African Rand (GBP/ZAR) exchange rate is grinding lower this afternoon. The pairing is now down almost 0.7% on the day.
The renewed pressure on GBP/ZAR comes and the merging market Rand is bolstered by a bullish market mood. The uptick in risk appetite is seemingly being driven by some upbeat US data.
US GDP was shown to have grown at an annual rate of 2.4% in the second quarter. This was up from the 2% Q1 and beat forecasts for a more modest 1.8% expansion. US durable goods orders were also shown to have massively outpaced forecasts in June.
The robust data indicates fears of a slowdown in the world’s largest economy may have been overblown. And that global growth may remain resilient in the current quarter.
Meanwhile, the Pound faces additional headwinds this afternoon, after the CBI’s distributive trades survey. A unexpected plunge in July’s index suggests the UK’s retail sector has suffered its worst month in over a year.
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Pound South African Rand Exchange Rate Weakens in Wake of Fed Rate Decision
The Pound South African Rand (GBP/ZAR) exchange rate is retreating this morning as markets digest the Federal Reserve’s latest interest rate decision.
At the time of writing the Pound South African Rand exchange rate is trading at around ZAR22.6508. Down roughly 0.5% from this morning’s opening rate.
South African Rand (ZAR) Buoyed by Signs Fed’s Hiking Cycle is Over
The South African Rand (ZAR) is strengthening this morning. The Rand is buoyed by both a pullback in the US Dollar (USD) and the prospect of US interest rates having peaked.
This follows the Fed’s interest rate decision on Wednesday. The Fed hiked rates by 25bps as expected, raising them to a new 22-year high.
However, in his accompanying press conference, Fed Chair Jerome Powell struck a more dovish tone than markets had expected. Powell was reluctant to commit to another hike in September and said the Fed would use upcoming data to guide its decision.
Powell said:
‘It is certainly possible that we would raise funds again at the September meeting if the data warranted. And I would also say it’s possible that we would choose to hold steady at that meeting. We’re going to be making careful assessments, meeting by meeting.’
Markets appear unconvinced that said data will warrant another hike. And analysts suggest Powell’s comments haven’t shifted this expectation.
Ellen Zentner, Chief US Economist at Morgan Stanley, comments:
‘Nothing in the policy statement or the press conference led me to doubt our view that this will be the last hike of the cycle.’
The expectation the Fed’s hiking cycle has come to an end reflects positively on the Rand. As higher US interest rates place more pressure on South Africa’s already struggling economy.
Pound (GBP) Subdued amid Easing BoE Rate Hike Bets
The Pound (GBP) is struggling to find support this morning. Easing Bank of England (BoE) rate hike bets continue to sap Sterling sentiment.
Expectations for a 50bps rate hike from the BoE next week now appear to have been completely discounted.
A larger-than-expected fall in UK inflation last month, coupled with the Fed’s dovish hike yesterday is seen as relieving pressure on the BoE to take more aggressive action.
Pound South African Rand Exchange Rate Forecast: Souring Mood to Dent ZAR?
Looking ahead, the Pound South African Rand (GBP/ZAR) exchange rate could see some movement later this afternoon with the publication of the latest US GDP figures.
The preliminary figures for the second quarter are expected to report a slowing of US economic growth.
A slowdown in the world’s largest economy may spook investors as it stokes concerns about global growth. This in turn could weaken market risk appetite and pull emerging market currencies like the Rand lower.
In the meantime, the Pound could receive a boost if the Confederation of British Industry’s (CBI) distributive trades index reports a positive shift in retail trade volumes this month.