GBP/ZAR Exchange Rate Dented by SARB Rate Hike
The Pound South African Rand (GBP/ZAR) exchange rate has been placed on the defensive this afternoon as markets react to the South African Reserve Bank’s (SARB) latest rate decision.
At the time of writing the GBP/ZAR exchange rate is down by roughly 0.3% having relinquished the gains made earlier this morning.
South African Rand (ZAR) Exchange Rates Bolsters as SARB Raises Interest Rates
The South African Rand (ZAR) has accelerated this afternoon as investors cheer the SARB’s decision to raise interest rates following its November policy meeting.
The SARB announced this afternoon that members had narrowly voted to raise interest rates to 6.75%, the bank’s first policy change since March when it cut rates to 6.5%.
The MPC has decided to increase the repurchase rate by 25 basis points to 6.75% per year, effective from 23 November 2018. pic.twitter.com/pQ82N17vRJ
— SA Reserve Bank (@SAReserveBank) November 22, 2018
The bank’s decision to hike rates comes on the back of rising inflation expectations as a result of rising oil prices and weaker ZAR exchange rates.
Commenting on the bank’s decision, Lesetja Kganyago, Governor of the SARB, said:
‘The weaker exchange rate and the impact of higher oil prices have contributed to inflation since March 2018.
‘While remaining within the inflation target range throughout the forecast period, the SARB’s model projects an increase in headline inflation, albeit slightly lower than the September projection.’
Pound’s (GBP) Losses Trimmed by Brexit Optimism
Meanwhile, while the Pound (GBP) has fallen against the South African Rand (ZAR) this afternoon, Sterling’s enjoyed considerable gains in wider currency markets thanks to a clearer Brexit outlook.
This comes as report emerge that the UK and EU had ‘agreed in principle’ a political declaration on the future relationship between the two sides.
This paves the way for the draft withdrawal agreement to be approved by EU leaders at an extraordinary summit to take place on Sunday, much to the relief of nervous GBP investors.
GBP/ZAR Exchange Rate Forecast: Brexit likely to Dominate Sterling Sentiment
Looking ahead, a continued lull in notable UK data, movement in the Pound South African Rand (GBP/ZAR) exchange rate is likely to be continue to be driven by Brexit sentiment.
This is likely to see Sterling accelerate into the weekend so long as investors remain confident that the Brexit deal will finalised on Sunday.
However looking further into the future there are still a number of downside risks to the Pound, most notably a parliamentary vote on the deal, which may see MP’s vote down the agreement.
Meanwhile the Rand may find itself forced to cede ground in the coming weeks if escalating trade tensions between the US and China dents market risk appetite.