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Pound to South African Rand Exchange Rate Predictions: Gold Prices Support ZAR

August 20, 2017 - Written by John Cameron

The Pound South African Rand exchange rate is seen trading higher at the beginning of the new week on currency markets, quoted at 16.99719.

The euro and US dollar are also clawing back some losses.

GBP/ZAR posted significant losses last week as foreign exchange markets were left disappointed by the UK's latest inflation figures.

Pound (GBP) Weakened by Lacklustre Data



Sterling got off to a poor start this week as the Office for National Statistics (ONS) reported that UK inflation held at 2.6% in July, coming in below expectations that it would rise to 2.7%.

Markets had hoped that a rise in inflation would place more pressure on the Bank of England (BoE) to raise interest rates, however with it appearing to slow in the past couple of months, some analysts suggest that the bank’s concerns over inflation may have been justified.

Fawad Razaqzada, market analyst at Forex.com said, ‘The pound has been largely out of favour ever since the Bank of England’s last policy meeting a couple of weeks ago, where only two Monetary Policy Committee members voted for a rate rise. Given the recent rise in inflation and the general improvement in the UK economy, the markets were surprised by the BoE’s dovishness. But today’s release of the latest inflation data for the month of July underscores the BoE’s cautious approach.’


Sterling attempted to find its feet again in the middle of the week however as the UK release some surprisingly upbeat employment data, with the ONS reporting that the jobless rate fell to a new 42-year low of 4.4% in June.

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However investors were even more impressed by the accompanying wage data as average earnings rose from 1.9% to 2.1% over the same period, helping to allay fears that the gap between wages and inflation would have continued to grow.

Ultimately it was not enough to repel the South African Rand’s mid-week advance however as the pairing fell to a new two-week low overnight on Wednesday, with the pairing only managing to mount a recovery on Thursday morning as the UK’s retail sales grew more than expected in July.

The South African Rand (ZAR) Rises



Receding political fears helped the South African Rand get off to a strong start this week, with markets beating that the local economy may be poised to mount a recovery.

Aiding the Rand’s rise this week as a tense political situation in the US in the wake of violence in Charlottesville caused the US Dollar (USD) to sink causing markets to rush to other safe haven assets such as gold.

With gold accounting for over 10% of South Africa’s exports the uptick in demand for the valuable metal helped to shore up the Rand throughout the week.

Meanwhile the Rand surged to a new weekly high on Wednesday as a larger than expected rise in domestic retail sales helped to increasing optimism that the South African economy will have fared a little better in the second quarter.

Stanlib economist Kevin Lings said, ‘Very encouragingly, in the past three months from April to June retail sales rose by a substantial 2.1 percent, which should help to boost the Q2 2017 GDP growth estimate, helping to pull South Africa out of recession.’


However the Rand’s rally came to an end in the second half of the week as traders sought to cash in on their profits, with the increased uncertainty following the terror attacks in Spain also causing markets to shy away from riskier currencies.

GBP ZAR Exchange Rate Forecast: UK GDP Estimate Ahead



Looking ahead the GBP ZAR exchange rate may tumble again next week as the UK releases its latest GDP estimate, with economists still forecasting that Britain’s economy will have only grown 0.3% in the second quarter.

Meanwhile an expected rise in South Africa’s inflation rate in July may weaken the Rand on Wednesday as it send it closer to the South African Reserve Bank’s (SARB) upper inflation target of 6% the point at which it is likely to begin to stifle growth.

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