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Pound Sterling Forecast: Will BoE Interest Rate Decision Boost GBP/ZAR Exchange Rate?

Bank of England

Chance for GBP/ZAR Exchange Rate Rise on BoE Meeting Minutes

Pound Sterling (GBP) has fallen by -0.6% against the stronger South African Rand (ZAR) today, trading at a level of ZAR19.4074.

This deterioration only represents a temporary dip in the GBP/ZAR exchange rate, which is still near its highest level since July 2016.

Among factors weakening the Pound today has been uncertainty about an imminent meeting of Bank of England (BoE) policymakers.

BoE officials will be meeting at noon for their monthly interest rate decision, but are expected to leave rates unchanged at 0.75%.

Despite this forecast, the minutes from the BoE meeting could still prompt a sharp Pound to Rand exchange rate rise if they reveal an optimistic outlook.

Some economists believe that the BoE is approaching a crossroads, with the conclusion of Brexit talks presenting a chance to make significant interest rate adjustments.

If BoE officials believe that the UK can weather the worst effects of the ongoing Brexit process then the Pound could rise – this would open the door to a 2019 rate hike.

On the other hand, however, if BoE officials predict that the UK economy could shrink because of Brexit then the Pound could slide in demand.

In the ideal world, BoE officials and BoE Governor Mark Carney will both hint at higher interest rates in the future, which could solidify hopes for a 2019 rate hike.

Rand to Pound Forecast: Will Lower South African Consumer Confidence Trigger ZAR/GBP Exchange Rate Losses?

Looking ahead, the South African Rand (ZAR) could weaken and fall against the Pound (GBP) in the coming week, on the release of South African consumer confidence data.

Tuesday’s data release for Q3 2018 is predicted to show a decline in sentiment levels, with a shift from 22 points to 17.

While such a result would still mean that optimistic consumers are in the majority, a decline could unsettle ZAR traders and lead to a loss against the Pound.

It is worth noting that consumer confidence was negative for all of 2016, 2017 and 2018 and has only just hit a positive range earlier this year.

Even the rise to 26 points soon gave way to a drop to 22 points, so another deterioration could spark fears about negative consumer confidence levels.

Accelerating South African Inflation Rate could Push ZAR/GBP Exchange Rate Higher

Beyond a potential ZAR/GBP drop on Tuesday’s South African consumer confidence reading, the South African currency could recover on Wednesday’s inflation data.

Covering inflation in August, this is expected to show an acceleration in the pace of price growth for the year-on-year reading, which might boost Rand demand.

While higher inflation puts more pressure on South African households, it also means that the South African Reserve Bank (SARB) is more likely to raise interest rates.

A rate hike could boost the ZAR/GBP exchange rate, not least because it could shore up the Rand’s value and raise economic confidnence.