GBP/ZAR Exchange Rate Stable as Bank of England (BoE) Tipped for May Interest Rate Hike

March 22, 2018 - Written by Toni Johnson

STORY LINK GBP/ZAR Exchange Rate Stable as Bank of England (BoE) Tipped for May Interest Rate Hike

On Wednesday’s trading session, the Pound to Rand exchange rate declined overall, having shifted from an opening level of 16.7589 to later close down lower in the region of 16.7251.

Wednesday’s major UK data covered the unemployment rate and changes to average earnings in January.

Unemployment unexpectedly fell from 4.4% to 4.3%, while the pace of average earnings accelerated with and without bonuses included.

The conclusion among economists was that this might increase the chances of the Bank of England (BoE) raising interest rates in the future, due to more stable conditions for UK consumers.

GBP/ZAR Exchange Rate Tight after BoE Hints at May UK Interest Rate Hike

The Pound has made minor gains against the South African Rand today, following a high-impact Bank of England (BoE) interest rate decision.

The UK central bank left interest rates at 0.5%, but economists were quick to conclude that a May interest rate hike could still be on the cards.

Offering a forecast, Institute of Directors Senior Economist Tej Parikh said;

‘Business leaders will welcome the Bank of England’s decision not to spring any surprises this month, but firms and households will be on tenterhooks for what comes in May.

The Bank has been paving the way for a rate rise, but must tread lightly until there is richer evidence of growing inflationary pressures, to avoid unnecessarily placing a speed bump in the way of economic activity’.

Another economist backing an interest rate hike at the end of spring was Ed Monk of Fidelity International, who said;

’The message from the Bank of England to borrowers couldn’t really be clearer: get ready for higher rates now. Two members voted for a rate rise this month and the Bank said nothing to dispel expectations that rates will rise in May.

The rate rise made in November felt like a straightforward reversal of the emergency post-Brexit cut, but this now feels more like we’re entering a genuine tightening phase at the Bank’.

South African Rand to Pound Exchange Rate Stays Flat on Mixed Retail Sales Data

The Rand to Pound exchange rate (ZAR/GBP) has been close on 22nd March, following the news that South African retail sales levels have improved on the month in January but slowed annually.

The month-on-month shift from -3.3% to -1.6% has left sales levels in a negative state, but this shift still represents an improvement.

Commenting on the results, Absa Bank’s Miyelani Maluleke said;

‘What the data certainly suggests is that there are pockets of the consumer that are remaining very resilient.

We expect that you will probably see more of that still in 2018 particularly if you do get a rebound in sentiment, but I think it will be weighed on a little bit by the tax increases announced in the budget’.

Pound to South African Rand Exchange Rate Forecast: Risk of GBP/ZAR Exchange Rate Slump on GDP Slowdown

The Pound could make more noticeable losses against the South African Rand in the week ahead, when finalised UK GDP growth rate data for Q4 2017 will be released.

If the results match up with currently pessimistic forecasts, the Pound could decline in value as quarter-on-quarter and year-on-year GDP levels would slow.

The coming Thursday will also bring UK business investment figures for Q4 2017, which could reduce any Pound losses as they are tipped to show slight annual growth in investment levels.

The only major South African data to watch out for next week will come at the end of weekly trading, when the trade balance for February is announced.

The trade balance reading out on 30th March is tipped to show a reduction in the current ZA trade deficit, although this may not be enough to raise demand for the South African currency late in the week.

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TAGS: Pound Rand Forecasts