Pound Sterling to South African Rand (GBP/ZAR) Conversion Rate Predicted to Strengthen despite Weak British Wage Growth
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate advanced by around 0.7% despite quiet market trade on Federal Reserve interest rate decision day.
With all eyes looking ahead to the Federal Open Market Committee (FOMC) interest rate decision, the currency market has seen comparatively subdued trade on Wednesday. The Pound Sterling edged lower versus some of its currency rivals following domestic labour market data which showed wage growth accelerated at a slower-than-forecast pace. This is significant because recently some Bank of England (BoE) officials highlighted the lack of robust wage growth as one of the principle reasons for keeping monetary policy ultra-accommodative.
Veteran economist and UK policy watcher at IHS Global Insight, Howard Archer, points out: ‘The Bank of England is currently paying much attention on wage growth, with the minutes of the December meeting highlighting the recent levelling off in nominal earnings growth after the increases earlier in 2015. The Monetary Policy Committee are not sure whether the recent levelling off of nominal pay growth is short-term volatility in the data or the consequence of factors such as recent low inflation limiting pay growth despite the tighter labour market, the consequence of shorter hours recently being worked or changes in the mix of employment.’
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is currently trending in the region of 22.5880.
South African Rand to Pound Sterling (ZAR/GBP) Exchange Rate Forecast to Dive on Political Uncertainty
The well-publicised antics of Jacob Zuma over the past few weeks has caused many South Africans to march in protest, with the hash tag #ZumaMustFall trending globally. Since President Zuma promoted a little-known local town mayor to Finance Minister the Rand plunged as investors questioned the abilities of an inexperienced man to govern a countries economic policy. President Zuma backtracked on the decision and reinstated a former Finance Minister who was replaced by the recently sacked and highly respected Nhlanhla Nene.
The Rand has extended losses on Wednesday afternoon amid uncertainty about Zuma’s future. There is a high chance that a dramatic shift in government policy would follow the ousting of Zuma which has some investors running scared. The current marches indicate that South African’s are no longer willing to be governed by a President they feel is corrupt, with many hoping for a change in democracy which would allow Presidents to be voted for rather than just appointed. Mark Heywood, a spokesman for health NGO Section 27, said people felt ‘betrayed’ by Mr Zuma’s actions, which saw the value of the Rand dive significantly. ‘They feel that he has behaved recklessly with our economy and therefore with our lives,’ he said. ‘People would not be able to show that and so we are lucky that we have a constitution which allows us freedom of expression.’
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate dropped to a low of 22.4010 today.
Pound Sterling to South African Rand Forecast: FOMC Rate Decision to Provoke Volatility
Although protests in South Africa are dominating the attention of Rand investors, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate is likely to see volatility in response to tonight’s FOMC interest rate decision. Should the Fed prove more hawkish than traders expect the Rand is likely to extend losses as an emerging market asset.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate reached a high of 22.6400 during Wednesday’s European session.
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