March 16, 2017 - Written by Toni Johnson
STORY LINK GBP ZAR Exchange Rate Tight on Zuma Questioning
The British Pound to South African Rand exchange rate held above weekly lows towards the end of the week’s European session, but still looked to record losses this week and end the week near lows not seen since 2013.
Analysts are becoming increasingly optimistic on the Rand outlook and risk measures on the currency have been consistently falling. GBP/ZAR could rise next week if UK inflation impresses, however.
[Previously updated 11:00 am]
The GBP ZAR exchange rate trended narrowly ahead of the weekend as the Pound struggled to hold onto its earlier momentum in the absence of fresh domestic data.
However, with the issue of a second Scottish independence referendum provoking a political stir within the UK Sterling is likely to come under increasing pressure.
[Previously updated 17/03/2017]
UK Economic Update: GBP Remains Flat against ZAR after Brexit Approval and BoE Split
The Pound has failed to post continuous gains against the South African Rand today, having started trading at 15.74 before falling to 15.58 and returning close to opening levels at 15.72 later on.
Initial losses were caused by the Queen granting royal assent to the Brexit bill, which removed the last hurdle to Theresa May triggering Article 50.
A later brief Pound Rand rally came from the Bank of England (BoE) interest rate decision, previously expected to be a non-event.
While the interest rate remained at 0.25%, policymaker Kristin Forbes notably dissented and voted for a rate hike, citing concern about inflationary pressures.
While only one pro-rate hike vote among 9, this surprise development still sent the Pound soaring and led some to upgrade their UK rate hike forecasts from 2019 to 2018.
Are Further GBP to ZAR Gains Incoming on UK Inflation Figures?
In the light of Forbes’ reason for voting for higher interest rates, Tuesday’s incoming UK inflation rate stats may boost the Pound instead of softening it as previously expected.
Initial expectations were for rising inflation to weaken the Pound, as increasing prices would combine negatively with slowing wage growth.
Since Forbes’ action, however, it seems that bigger is better when it comes to inflation as greater price pressures seem set to bring a UK interest rate hike closer.
ZAR Holds the Line against GBP as President Zuma Faces Questioning
The Rand has kept the buoyant Pound in check today, having been supported by the news that President Jacob Zuma will face questioning from MPs.
The Q&A session is the first of at least four this year and as usual, any chance for the controversial President to be taken down a peg has raised Rand demand considerably.
Among other issues faced by the President have been the payment of social grants, as well as the need to hold his party’s senior figures accountable for corrupt activities.
Future ZAR Forecast: Thin Data Spread Leaves Inflation Rate as Major Influence
While the Rand has held fast against the Pound today, a data-drought in the future means that Sterling could stage a comeback in the coming weeks.
Next week in particular only has South African inflation data expected on Wednesday, which is currently likely to lower confidence in the South African economy.
The South African Reserve Bank (SARB) inflation rate target is 3-6%, which means that if inflation continues to post around 6.6% as it has previously then the Rand could drop sharply on pricing concerns.
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TAGS: Daily Currency Updates Pound Rand Forecasts