Pound (GBP) Trends Higher ahead of UK Employment Data, Rand (ZAR) Softens on FED Rate Hike Worries
Some of the Rand’s (ZAR) bullishness has worn off this morning as the GBP/ZAR exchange rate began to claw back recent losses. With the final Federal Open Market Committee (FOMC) decision of 2015 mere hours away the commodity-correlated currency has been softened as traders position for an imminent hike. Consequently the GBP/ZAR exchange rate was trending in the region of 22.4660.
Earlier…
As the Rand (ZAR) continues to strengthen on Tuesday the Pound (GBP) has remained softer in spite of UK inflation having returned to positive territory.
South African Currency News: ZAR Dominant after Announcement of New Finance Minister
Monday saw the Pound Sterling to South African Rand (GBP/ZAR) exchange rate retreat from its record high of 24.3466 as the country appointed its third finance minister in five days. Markets reacted positively to the news that Pravin Gordhan had been re-appointed to the positon, having previously served as finance minister from 2009 to 2014, which went some way to rescuing the Rand from its severe slump. Gordhan’s experience and pledges to restore the strength of the ailing currency offered enough reassurance to push the GBP/ZAR pairing down sharply, despite a day of general market and commodity volatility.
Sterling (GBP), meanwhile, was weighed down by the revelation that Rightmove House Prices had climbed from 6.2% to 7.4% on the year in December. While housing prices did also weaken on the month this did not prevent investors from reacting unfavourably to the news, stoking fears that the domestic market remains in a bubble.
Improved UK Inflation Fails to Rescue GBP/ZAR Exchange Rate from Slump Today
Although the UK Consumer Price Index proved positive this morning, with baseline inflation climbing from -0.1% to 0.1% and eliminating concerns of domestic deflation, this nevertheless failed to bolster the appeal of the Pound. This limited level of inflationary pressure remains significantly short of the Bank of England’s (BoE) target range, giving policymakers little incentive to begin tightening monetary policy in the coming months. With pundits anticipating the possibility that the CPI could easily dip back into negative territory Sterling has continued to trend lower against many of its rivals today.
GBP/ZAR Exchange Rate Forecast: Rand Predicted to Weaken on Fed Rate Hike
If the Federal Open Market Committee (FOMC) does vote to raise interest rates tomorrow, as markets widely expect, the Rand could return to more bearish form on the back of a stronger US Dollar (USD). However, if policymakers prove more dovish in their assessment of the pace and timing of any future interest rate moves in the coming year the Rand may hold on to its recent gains.
Tomorrow’s raft of UK employment data is unlikely to provoke fresh Pound strength, as Average Weekly Earnings are expected to have slowed in the three months to October. However, as the Jobless Claims Change figure is forecast to show a marked decline in the number of people claiming unemployment benefits the GBP/ZAR exchange rate could trend higher.
Current GBP, ZAR Exchange Rates
At time of writing, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate was in a severe slump around 22.6180, while the South African Rand to Pound Sterling (ZAR/GBP) pairing was trending higher in the region of 0.0441.
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