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Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Slides as SARB Slashes Interest Rates

Pound South African Rand (GBP/ZAR) Exchange Rate Falls as SARB Under Pressure to Cut Rates

UPDATE: On Thursday, the Pound Sterling South African Rand (GBP/ZAR) exchange rate slipped by around -0.3%.

The pairing is currently trading at an inter-bank rate of R17.3622

The risk-sensitive South African Rand was provided with an upswing of support on Thursday afternoon after the South African Reserve Bank (SARB) slashed interest rates.

The bank cut interest rates for the first time since March 2018.

Like many central banks the SARB was under pressure to cut rates, with the bank citing inflation remaining around the mid-point of its target and weak economic growth.

The bank cut rates by 25 basis points from 6.75% to 6.5%.

Speaking at a news conference, SARB Governor Lesetja Kganyago stated:

‘The MPC welcomes the continued downward trend in recent inflation outcomes and the moderation in inflation expectations of about one percentage point since 2016.’

Pound South African Rand (GBP/ZAR) Exchange Rate Flat as South African Retail Sales Rise

The Pound Sterling South African Rand (GBP/ZAR) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of R17.3032.

On Wednesday, South African retail sales rose by a higher-than-forecast 2.2% in May.

This came following April’s annual increase of 2.4%.

Meanwhile, Statistics South Africa revealed that annual growth rose by 3.2% for retailers in household furniture, appliances and equipment, and general dealers saw growth of 4%.

Sentiment in the South African Rand was likely provided with an upswing of support, however the pairing remained muted as risk-appetite plummeted.

US-China Woes Leave South African Rand (ZAR) under Pressure

On Wednesday the risk-sensitive South African Rand was left under pressure as US-China trade tensions resurfaced.

On Tuesday, US President Donald Trump noted that Washington and Beijing have a long way to go on trade.

He also added that the United States could hit Chinese imports with a further $325 billion worth of tariffs ‘if we want.’

These comments came just after an agreement not to ramp up trade tensions was made in attempt to restart the abandoned trade talks.

Sterling (GBP) Flat as Inflation Remained Steady at BoE’s Target

On Wednesday data from the Office for National Statistics (ONS) revealed that London house prices fell at the fastest rate in a decade.

House prices in the capital slumped by an annual -4.4%, the fastest rate since August 2009.

Meanwhile, separate data from the ONS showed that the UK Consumer Price Index remained steady, rising by 2% in June.

This benefitted workers as yesterday’s wage growth data showed wages rose by 3.6% in Q2 2019, revealing a rise in real wages.

Commenting on the data, Head of Inflation at the ONS, Mike Hardie noted:

‘The overall rate of inflation remains steady, with no change in pace this month. Petrol and diesel prices fell this year but rose a year ago, while clothes prices dropped by less than this time last year.’

No-Deal Brexit Fears Drag the Pound (GBP) Lower

No-deal Brexit fears continued to grip financial markets and sent Sterling lower.

However, the Pound South African Rand (GBP/ZAR) exchange rate remained muted as risk-appetite fell.

Both Conservative leader candidates, Boris Johnson and Jeremy Hunt stated they would abandon the Northern Ireland backstop.

Pound sentiment was dragged lower as reports suggested Boris Johnson would schedule the next Queen’s speech to ensure Parliament shuts before the Halloween deadline.

This would mean MPs would be unavailable to stop a no-deal Brexit immediately before the 31 October deadline.   

Pound South African Rand Outlook: Will a Dovish SARB Weigh on ZAR?

Looking ahead to Thursday, the Pound (GBP) could slide against the South African Rand (ZAR) following the release of the UK retail sales.

Sterling sentiment could be left dampened if sales slump further than expected between May and June.

Meanwhile, in the afternoon the South African Rand could slide following the South African Reserve Bank (SARB) interest rate decision.

The SARB is expected to cut interest rates which could cause the Pound South African Rand (GBP/ZAR) exchange rate to rise.