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GBP ZAR Exchange Rate Trends Narrowly Ahead of Zuma State of the Nation Address

February 8, 2017 - Written by Ben Hughes

The British Pound to South African Rand exchange rate flattened on Thursday afternoon, slumping from its weekly highs due to lower Bank of England (BoE) tightening bets.

Investors became less optimistic about the foreseeable future of UK monetary policy once it emerged that BoE hawk Kristin Forbes was stepping down from the Monetary Policy Committee (MPC) in June.

[Previously Updated 08/02/2017]

Unexpectedly hawkish comments from Bank of England (BoE) policymaker Kristin Forbes helped to shore up the Pound Sterling South African Rand (GBP ZAR) exchange rate, suggesting that the continued resilience of the economy could necessitate an interest rate hike.

Mixed Messages from BoE Provoked GBP Volatility



The prospect of the BoE shifting towards a hawkish outlook on monetary policy bolstered the Pound, although Deputy Governor Jon Cunliffe later took a more cautious tone on the matter.

As analysts at Nomura noted:

‘We expect the Bank of England to largely look through [rising CPI inflation] and not raise interest rates until H2 2019, when the MPC will understand much more about the process and implications of Brexit, and dovish Governor Mark Carney will have left the Bank.’


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Sterling has experienced some downside pressure as MPs failed to pass amendments to the government’s Article 50 bill, raising fears that Theresa May’s harder line on negotiations will not be moderated by Parliament.

With the prospect of a hard Brexit seeming more likely the GBP ZAR exchange rate ceded its earlier gains during Wednesday’s European session.

ZAR Weighed Down by Domestic Political Worries



Political tensions have been weighing on the South African Rand, meanwhile, after President Jacob Zuma ordered the deployment of troops within parliament during his State of the Nation speech.

The move highlighted the ongoing sense of unrest within South Africa, casting a fresh shadow over the outlook of the beleaguered domestic economy.

Even so, an increase in gold prices as the US Dollar weakened helped to limit the downtrend of the Rand, despite the softness of Tuesday’s foreign exchange reserves figure.

So long as the new US administration continues to provoke market jitters the Rand is likely to benefit from higher gold prices, even if risk appetite remains generally limited.

GBP ZAR Exchange Rate Forecast: South Africa and UK Production Data in Focus



The latest raft of South African production figures could offer the GBP ZAR exchange rate a stronger rallying point on Thursday, with forecasts pointing towards a stagnation in manufacturing output on the year.

If the mining and gold production figures are found to have contracted further, meanwhile, investors may see little reason to buy into the Rand.

On the other hand, the Pound could come under pressure ahead of the weekend if UK production and construction output data fails to impress.

Any indication that the UK economy is beginning to lose momentum is expected to weigh heavily on Sterling, although if December’s visible trade deficit narrows in line with forecasts the GBP ZAR exchange rate may not see a severe slump.
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TAGS: Pound Rand Forecasts Pound Sterling Forecasts

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