Sterling (GBP) Enters Bearish Trend as Interest Rate Hike Hopes Recede to Prompt GBP/ZAR Exchange Rate Dip
Yesterday’s Bank of England (BoE) data inspired more dovish trading than anticipated, as the Monetary Policy Committee (MPC) voted 8-1 in favour of maintaining the current level of interest rates. Indications now suggest that a rate rise will not occur before the end of the year, which sent the Pound (GBP) into serious decline against all rivals. The GBP/ZAR exchange rate slumped to 19.7423 in the immediate aftermath and remains in a generally downward trend, presently in the range of 19.7110.
With the South African Rand (ZAR) remaining weak, Sterling (GBP) looks to make greater gains on ‘Super Thursday’ and boost the GBP/ZAR exchange rate to new highs.
Optimistic PMI Reports Bolster Pound (GBP) to Continue Bullish Run at Record Highs Against Rand (ZAR)
PMI results for the UK have been a relatively mixed bag this week, with only the manufacturing sector posting a greater rate of growth over the previous figures. However, Construction and Services disappointments ultimately saw the nation’s Composite PMI fall short of forecast by just 0.3 to achieve a final result of 56.6. Pundits remained in a state of relative optimism, given that the indices have remained above the baseline in spite of declines. Consequently Sterling (GBP) returned to bullish form, pushing the GBP/ZAR exchange rate from 19.8263 to strike a fresh over ten-year high of 20.0161.
South Africa produced a result of 51.4 on its own Manufacturing PMI on Monday, equalling the previous month’s figure rather than suffering the anticipated drop to 50.49 to stay on a trend of positive growth. Nevertheless, it was speculators hedging bets ahead of the upcoming Bank of England (BoE) data that ultimately prompted the GBP/ZAR pairing to retreat slightly overnight.
Production Figures Decrease for UK Ahead of Rate Decision, GBP/ZAR Remains Strong on Softening Rand
Industrial and Manufacturing Production reports for the UK were published today and saw year-on-year output slips, with production increasing at a lower rate than anticipated as manufacturing stalled to just 0.5% expansion. The effect of these releases has been minimal, however, as they stand to be quickly eclipsed by this afternoon’s BoE data. For the first time in the institution’s history the Rate Decision, Inflation Report and Monetary Policy Committee (MPC) meeting minutes will all be published on the same day. Expectations are that this will see the beginning of the BoE moving towards an interest rate rise, and any confirmation of that hawkish sentiment will certainly push Sterling to further gains.
The Rand (ZAR) is continuing to struggle as the still-strengthening ‘Greenback’ (USD) puts pressure on its value as global commodity prices remain in a slump. Recovery for the mining sector certainly does not appear to be especially likely in the current climate. Foreign data remains the prime driver however, as the GBP/ZAR exchange rate continues to trend high.
Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast: Pound has Potential to Soar Should Bank of England Prove Hawkish
A few more data releases are to come from South Africa over the next week, however, with Manufacturing and Mining Production figures due to be released on Tuesday and Thursday. Any encouragement from these could potentially allow the Rand to recover slightly, especially should evidence emerge of a pick-up for the mining sector.
The UK is likewise not expecting much in the way of domestic data in the coming days, aside from tomorrow’s Balance of Trade. However, this afternoon’s movement seems certain to see a significant shift for the exchange rate with the possibility of GBP/ZAR returning to record highs before the weekend.
Current GBP, ZAR Exchange Rates
Presently the GBP/ZAR pairing is trending in the range of 19.9010, while ZAR/GBP remains near record lows at 0.1682.