Pound (GBP) Exchange Rate Outlook Positive as UK House Prices Continue Rise
The Pound to South African Rand (GBP/ZAR) exchange rate rallied on Monday, capitalising on news that UK house prices continued to rise in April and anticipation for tomorrow’s UK labour market figures.
According to Rightmove, the average UK house price increased to a record high of £305,732 in April, up 0.4% between March and April with a 1.6% increase compared to this time last year.
This news helped quell concerns that the Brexit process might result in falling house prices, with markets also content that it could remove any risk for the Bank of England (BoE) in raising the baseline interest rate in May.
South African Inflation, Retail Sales Ahead – What can we Expect for the GBP/ZAR Exchange Rate?
The South African Rand (ZAR) could encounter some volatility tomorrow depending on the performance of the South African inflation readings for March.
Markets currently expect a rise month-on-month from 0.8% to 1.0%, with the year-on-year reading also expected to climb, this time from 4.0% to 4.4%.
If acceleration does occur then it could push the South African Reserve Bank to continue with their cycle of monetary easing, particularly after the central bank’s Monetary Policy Committee voted to reduce interest rates back in March.
There is also the ongoing consideration that the South African Rand is currently overvalued, and that further gains to the ZAR will likely be limited.
Combined, this outlook could continue to weigh on the Rand, particularly if retail sales within the region also prove poor.
UK Wage Growth Acceleration Forecast – Pound (GBP) Exchange Rates Liable to Rally
The market outlook for Tuesday’s UK labour market statistics is currently rather positive, with analysts expecting an accelerated rise in average earnings (including bonuses), an added 51k jobs in January, and an unemployment rate print of 4.3%.
If this occurs then it would illustrate that the UK’s labour market continues to tighten, with the record-low unemployment rate and the renewed acceleration in wage growth liable to keep the central bank on hawkish form.
It should also be stressed, however, that markets will be keeping a keen eye on Wednesday’s UK consumer price inflation results, with economists expecting the monthly reading to ease from 0.4% to 0.3% in March, whilst the yearly result is forecast to hold at 2.7%.
A drop could knock rate hike expectations, but even if it does occur it would still hold drastically above the central bank’s target range.
In this regard, the near-term outlook for the GBP/ZAR exchange rate this week is predominantly positive.