Pound South African Rand (GBP/ZAR) Exchange Rate Fluctuates at Six-Week High as SARB Leaves Rates Unchanged

Pound South African Rand (GBP/ZAR) Exchange Rate Stays Strong following UK PMI

(Updated 14:30, 23/11/23) The Pound South African Rand (GBP/ZAR) exchange rate has fluctuated near a six-week high today amid a risk-on market mood, positive UK economic data, and an interest rate hold from the South African Reserve Bank (SARB).

After retreating this morning, the Pound (GBP) then received a boost from the UK’s latest PMI reports. British service sector activity unexpectedly expanded this month, helping to ease recent concerns about the health of the UK economy. This helped GBP/ZAR recoup earlier losses, reapproaching a six-week high.

However, the risk-sensitive South African Rand (ZAR) remained underpinned by an upbeat market mood, which prevented the Pound from climbing even higher.

In addition, the SARB’s latest interest rate decision drove volatility. The central bank left interest rates unchanged, as expected, while upwardly revising its growth forecasts for the next few years due to an expected decrease in load-shedding measures.

Although expected, the lack of a rate hike seemed to dent ZAR. Meanwhile, the positive economic outlook limited the downside.

GBP/ZAR fluctuated in the wake of the decision but, at the time of writing, has pushed back to a fresh six-week high. The pairing is currently trading at ZAR23.6605, up almost 0.3% on the day.

Original article continues below:

Pound South African Rand (GBP/ZAR) Exchange Rate Slips amid Upbeat Market Mood

The Pound South African Rand (GBP/ZAR) exchange rate is edging lower this morning, having hit a six-week high overnight, as investors await the South African Reserve Bank’s (SARB) interest rate decision.

At the time of writing, GBP/ZAR is trading at around ZAR23.5075, down almost 0.3% on the day.

South African Rand (ZAR) Rises amid Risk-On Trade

The risk-sensitive South African Rand (ZAR) is climbing up from multi-week lows this morning amid a cheery market mood.

ZAR came under heavy selling pressure yesterday due to its strong negative correlation with the US Dollar (USD). In addition, higher-than-forecast inflation data raised concerns about the long-term health of the South African economy.

Today, USD is retreating as American markets close for Thanksgiving and a risk-on mood seeps markets. Investors are increasingly convinced that the Federal Reserve has finished its tightening cycle, with many now hopeful that interest rate cuts aren’t too far away.

This pullback in the US Dollar and the improvement in sentiment are both lending ZAR support.

Pound (GBP) Mixed following PMI Data

Meanwhile, the Pound (GBP) is managing to resist steeper losses today after the UK’s PMI surveys beat forecasts.

November’s preliminary results showed that service sector activity in the UK actually expanded, rather than contracting, although the pace of growth was glacial. The services PMI score came in at 50.5, versus the forecast 49.5; a score of 50 represents stagnant activity.

In addition, the manufacturing score – which is less important for the UK economy – also came in above expectations, though it remained in contraction territory at 46.7.

While the positive PMI results are lending Sterling support, the ongoing analysis of yesterday’s Autumn Statement is putting some pressure on the Pound.

Economists and thinktanks are today offering their takes on the Chancellor’s tax and spending plans. Analysts are arguing that, despite tax cuts announced yesterday, fiscal policy will remain tight for some time. There are also concerns about the UK’s growth forecasts, which were revised down.

These anxieties are keeping a lid on GBP/ZAR today.

GBP/ZAR Exchange Rate Forecast: SARB Decision in the Spotlight

Looking ahead, the SARB will announce its latest interest rate decision this afternoon. Markets broadly expect the central bank to leave interest rates unchanged, which means the focus may be on its forward guidance.

If the SARB indicates that interest rates may need to remain higher for longer, potentially weighing on South African economic growth, the Rand could stumble.

Economic data is then thin on the ground through to the end of the week. As a result, risk appetite could drive the GBP/ZAR exchange rate. If markets remain upbeat, the Rand could recover further. However, if sentiment sours then Sterling could potentially hit fresh multi-week highs.

Samuel Birnie

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