The Pound Sterling to South African Rand (GBP/ZAR) exchange rate strengthened 0.30% on Wednesday as a weak inflation report out of the African nation and speculation on interest rate hikes.
The Pound Sterling to South African Rand exchange rate hit a session high of 18.016
At a conference on Tuesday, South African Reserve Bank governor Lestja Kganyago argued that the bank would have to normalise the nation’s interest rates over the coming months in order to protect the country’s savings structure.
‘Although further rate hikes from the Reserve Bank will be Rand positive over the medium term. Rand bulls once again appeared concerned that a fresh wave of policy normalisation could prompt some foreign bond investors to reduce some of their South African holdings and in so doing reduce much-needed capital inflows into the country,’ said Barclays in a note to clients.
Concerns over a change to the nation’s interest rate was then eased slightly as data showed that Consumer price inflation in South Africa fell to 4.4% in January due to falling oil prices. The decline now allows the SARB some breathing room and eases pressure for it to make an alteration.
Power Outages Cause Concern
Despite that, the Rand weakened as economist forecast that the already weak South African economy would deteriorate further as it suffers from the affects of the worst power outages in seven years.
Eskom, the nation’s main utility supplier has been struggling to keep the lights on in the face of ever-growing energy demands. In order to prevent a total collapse the company has introduced load shedding and rolling blackouts.
‘The potential impacts that load shedding will have on business, business confidence and consumers alike are inestimable,’ said South Africa Chamber of Commerce and Industry President Vusi Khumalo.
UK Data Beats Forecast
The Pound Sterling meanwhile received support ahead of the release of unemployment, average earnings data as well as the minutes of the Bank of England’s February policy meeting.
Data showed that the UK’s unemployment rate fell unexpectedly to 5.7% and average earnings including bonuses increased more than forecast. Average earnings excluding bonuses rose by 1.7%.
The claimant count change also improved strongly by showing that the number of Britons filing for jobless benefits fell sharply by 38,600, beating forecasts for a fall of 24,400.
