Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast Lower after BoE Holds Rates
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate declined by around -1.7% on Thursday afternoon.
With the exception of just a few currencies, the British Pound strengthened versus most of its major peers today. This is despite ongoing disappointment following Chancellor George Osborne’s Budget Statement which saw a reduction to UK growth forecasts and a drop in public spending.
Sterling’s appreciation can be linked to minutes relating to today’s Bank of England (BoE) monetary policy decision. Whilst the Monetary Policy Committee (MPC) kept the benchmark interest rate and rate of asset purchases unchanged, as was widely expected, the minutes also showed that officials were in no way considering adopting negative interest rates. All nine members agreed that the next move, albeit some way off due to EU referendum uncertainty, will be a rate hike.
‘The vote was unchanged at 9-0 which was in line with the consensus expectations,’ said Sam Lynton-Brown, a London-based foreign-exchange strategist at BNP Paribas SA. ‘However, some in the market were flagging there was a risk we could see a dissent in favour of a rate cut’ and therefore Sterling rose as those ‘expectations had been disappointed.’
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is currently trending in the region of 21.9220.
South African Rand to Pound Sterling (ZAR/GBP) Exchange Rate Forecast to Advance on Reduced Fed Rate Hike Bets
Since the Federal Reserve announced a reduction to rate hike expectations, dropping to just two in 2016, emerging-market assets soared. The South African Rand capitalised fully, registering marked gains versus many of its closest rivals. It is fair to say that the Rand is still holding a comparatively weak position, however, having fallen considerably after President Jacob Zuma fired a well-respected finance minister and replaced him with a complete unknown.
It seems as if Zuma’s reputation has been irreparably tarnished now, and his reduced grip on power has been well received by traders. Zuma’s lost influence was evidenced by reports that a number of government officials have been offered high ranking positions by the Gupta family, family friends of Zuma and business partners of his son.
‘As these things are coming out more and more into the open, there’s a much better chance that the law will take its course and that the economy might start heading in the right direction,’ said Michele Santangelo, money manager at Vunani Private Clients. ‘There does seem to be quite a lot of positive moves from some of the ministers that are coming out and saying that they’ve been offered positions by the Gupta family.’
Also bolstering Rand gains today was the decision by the South African Reserve Bank to hike the overnight cash rate to 7%. This was due to inflationary pressures with consumer prices well above the bank’s 3-6% target range.
‘Food price pressures‚ driven by the drought and the depreciated exchange rate‚ have intensified by more than previously forecast and remain a significant upside risk to inflation‚’ Bank governor Lesetja Kganyago said.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate dropped to a low of 21.8180 during Thursday’s European session.
GBP/ZAR Exchange Rate Forecast: US Data to Provoke Volatility
Given the complete absence of both British and South African data publications tomorrow, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate is likely to see volatility in response to US ecostats. In particular, the University of Michigan Confidence report should be highly impactful.
Risk-appetite will also play a large part in GBP/ZAR movement tomorrow, so China’s Property Price data may influence changes.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate reached a high of 22.4180 during Thursday’s European session.
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