Pound South African Rand (GBP/ZAR) exchange rate strengthens amid data lull
The Pound South African Rand (GBP/ZAR) exchange rate is edging higher this morning as declining commodity prices weigh on the South African Rand (ZAR), ahead of potentially impactful Bank of England (BoE) commentary later today.
At the time of writing the GBP/ZAR exchange rate is trading at around ZAR23.9119, up approximately 0.2% from this morning’s opening rate.
Pound (GBP) wavers amid lack of data
The Pound (GBP) is muted this morning as hesitant investors avoid placing any aggressive bets on Sterling, ahead of further policy review from opposing BoE rate-setters this afternoon.
GBP retreated from yesterday’s hawkish wins overnight, beginning today’s data light session without a clear trajectory. Further hawkish rhetoric this afternoon may see the Pound climb on waning rate cut bets once again.
A speech from BoE Deputy Governor Sarah Breeden yesterday seemed to highlight that the central bank was in no rush to begin its unwinding cycle.
Breeden stated: ‘Instead my focus, and indeed the focus of many on the MPC, has shifted to thinking about how long rates need to remain at their current level.’
Underpinning Breeden’s claims were signs of recovery in the UK’s housing market, which reported a 2.5% rise in UK house prices in the year to January. While BoE policymakers have offered increasingly mixed commentary in recent days, GBP investors are holding steady ahead of further supporting guidance.
South African Rand (ZAR) slumps amid sparsity of data
The South African Rand is on the defensive this morning following a dip in commodities.
The commodity-driven ZAR faces selling pressure as the session opens, following a slump in gold prices by 0.27% from yesterday’s closing price. A 0.39% decline in iron ore pries so far today also serves to sour ZAR sentiment due to the South African Rand’s positive correlation with these materials.
Plans from Eskom to reduce load shedding in the coming days amid National sporting events may also serve to boost ZAR sentiment as today’s session progresses.
A lack of data could then leave the acutely risk-sensitive South African Rand vulnerable to fluctuations in market sentiment as the session continues, with cheery trade potentially boosting ZAR against its safer peers.
Pound South African Rand exchange rate forecast: BoE to Strike Hawkish?
Looking ahead, notable economic data is in short supply as the week draws to a close, for both the UK and South Africa. This will likely leave any forward guidance from each respective country’s monetary policy committees in focus.
Speeches later this afternoon from BoE policymakers Swati Dhingra and Tamsin L Mann may drive GBP volatility. While Dhingra was the sole voter for a rate cut of 25 basis points during last week’s BoE interest rate decision, Mann was one of two rate-setters to vote for a rate hike.
Conflicting commentary from the two opposing policymakers could cause mixed trade for the Pound, offering an increasingly unclear timeframe surrounding the UK’s upcoming unwinding cycle.
In South Africa, the annual State of the Nation Address (SONA) is also due this afternoon. President Cyril Ramaphosa is due to unveil the governmental agenda for the coming year, and report on the status of the nation. Should government officials express economic optimism during their address, ZAR could rebound.
In the meantime, the Pound South African Rand exchange rate may be susceptible to changed in market sentiment. An increasingly upbeat market mood could allow the risk-sensitive ZAR to take precedent over the Pound.