Pound South African Rand (GBP/ZAR) Exchange Rate Edges Lower as Markets Mull BoE Comments
(Updated 14:30, 08/09/23) The Pound South African Rand (GBP/ZAR) exchange rate continued to tick lower today as markets digested recent dovish comments from the Bank of England (BoE) Governor, Andrew Bailey.
Amid a lack of British economic data today, investors in the Pound (GBP) were left to digest BoE chief Bailey’s comments on Wednesday, in which he indicated that the bank is near the end of its interest rate hiking cycle.
New data yesterday, including falling house prices and a business survey from the BoE, added to the pullback in BoE bets.
This has seen Sterling slip around 0.4% against the South African Rand (ZAR) today. However, GBP/ZAR is still up on the week by around 0.7%, after an impressive rally on Monday.
Sterling is trying desperately to cling to the week’s gains, as a gloomy market mood stifles the risk-sensitive Rand’s potential.
At the time of writing, GBP/ZAR is at ZAR23.8208, down from a three-week high of ZAR24.2606 hit on Wednesday before BoE Bailey’s comments.
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Pound South African Rand (GBP/ZAR) Exchange Rate Extends Fall from Three-Week High
The Pound South African Rand (GBP/ZAR) exchange rate is softening today, with the pairing continuing to trim its gains after hitting a near three-week high earlier in the week.
At the time of writing, GBP/ZAR is trading at ZAR23.8139, down around 0.4% on the day.
Pound (GBP) Softens in Wake of BoE Comments
The Pound (GBP) continues to trim its weekly gains against the South African Rand (ZAR) today, as a lack of UK economic data leaves GBP investors to reflect on the recent pullback in Bank of England (BoE) interest rate hike bets.
On Wednesday, BoE Governor Andrew Bailey sounded dovish when facing a grilling from MPs on the Treasury Select Committee. Bailey said he expects to see a ‘quite marked’ fall in inflation by year’s end, and said the bank was nearing the end of its cycle.
Yesterday, a slump in house prices and signs of easing inflation and wage growth added to speculation that the BoE may not raise rates as high as expected.
With UK data thin on the ground today, this is continuing to weigh on the Pound. Sterling is continuing to give up the gains made earlier in the week.
South African Rand (ZAR) Limited by Risk-Off Trade
Meanwhile, the South African Rand is struggling to capitalise on the Pound’s weakness, due to its risk-sensitive nature and its negative correlation with a recovering US Dollar (USD).
After a sharp fall overnight, USD has bounced back during today’s European session, putting pressure on ZAR.
Furthermore, a gloomy market mood is weighing on the riskier Rand, capping its gains against the Pound.
GBP/ZAR Exchange Rate Forecast: UK Data to Drive Volatility?
Looking forward to next week’s session, BoE interest rate expectations are likely to drive the Pound.
The week kicks off with a speech from the bank’s Chief Economist, Huw Pill. Last week, Pill’s muddled messaging put some pressure on the Pound as he created a sense of uncertainty. More ambiguous comments could dent GBP.
On Tuesday, the UK’s latest labour market report is due out. While unemployment is set to tick higher, forecasters predict that wage growth will remain near record highs. This could create volatility in Sterling, although signs of second-round inflation effects could boost BoE bets and push the Pound higher overall.
British GDP for July is then due out on Wednesday. After wet weather hammered UK retail sales that month, economists expect to see a contraction in GDP. If so, Sterling could struggle.
As for the Rand, a slowdown in South African manufacturing production in July – due to be published on Monday – could dampen demand. However, risk appetite and ZAR’s correlation with USD may drive most movement throughout the week.