The Pound to South African Rand (GBP/ZAR) exchange rate has recorded losses on Tuesday as Chinese data bolstered the emerging-market currency. The GBP to ZAR currency pair has seen market movement of -0.41% and is currently trading in the range of 17.8119.
A Chinese report showed Industrial Production rose by 8.0% on the year, whilst Gross Domestic Product (GDP) numbers also showed third quarter growth of 7.3% on an annual basis. Despite Chinese economic growth not being as expansive in 2014 as some had hoped, the third quarter stats beat economists’ 7.2% forecast.
South African Inflation Data Could See Rand Volatility
However, Wednesday will see South Africa unveil Inflation Rate figures which could alter the Rand significantly. As Barclays Africa suggests; ‘Even though this morning’s Gross Domestic Product data out of China came out slightly stronger than consensus, we still believe the Rand is vulnerable to Wednesday’s local consumer inflation figures and the medium-term budget policy speech.’
There’s presently much speculation surrounding the prospect of raising borrowing costs in South Africa. At present, the South African Reserve Bank (SARB) holds a 3-6% inflation rate target; however, consumer price growth is expected to rise from 6.4% on Wednesday to 6.5%.
If inflation continues to rise uncontrollably, the chances of the central bank increasing interest rates are relatively high. Economist Jana van Deventer stated: ‘Another interest rate increase is not a given. If we don’t have pressures from global markets to raise interest rates, it could provide room for the South African Reserve Bank to keep rates relatively low for longer.’
Pound Exchange Rate to Expect Fluctuations on Meeting Minutes
Meanwhile, the Pound can expect a bumpy day on Wednesday with the release of the Bank of England (BoE) meeting minutes. The minutes will show the number of votes by policymakers for and against an immediate increase in borrowing costs in the UK.
Bank of England Governor, Mark Carney, is currently residing firmly in the ‘No’ camp, along with six others in the Monetary Policy Committee (MPC). However, two policymakers have split away from the general consensus in the last two meetings.
Furthermore, the Governor came under fire on Tuesday from a Bank of England mishap caused a nine-hour delay on payments. The problem occurred after scheduled weekend maintenance took place and disrupted bank transfers and house purchases. The unfortunate incident was the first to occur in seven years.
Committee Chairman Andrew Tyrie commented: ‘A crucial part of the UK’s financial infrastructure failed for several hours. We need to have confidence that the cause has been found and addressed.’
Pound to South African Rand (GBP/ZAR) Exchange Rate Forecast
Wednesday will be the most influential day for the Rand the remainder of the week as investors could price in the likelihood of an interest rate hike and move the Rand exchange rate. As well as the BoE’s minutes, investors with an interest in the Pound will watch Deputy Governor Andrew Bailey being questioned by Parliament’s Treasury Committee. A particularly hawkish or dovish central banker could result in Sterling movement.
With no other South African data due out in the rest of the week, the GBP to ZAR exchange rate will be reliant on global developments and UK figures. Thursday will see the release of UK Retail Sales whilst Friday will be highly significant for Sterling as Gross Domestic Product figures are published.
The Pound to South African Rand exchange rate has been trading between the boundaries of 17.7745 and 17.8656 in Tuesday’s European session.
