The Pound to South African (GBP/ZAR) exchange rate softened on Thursday afternoon after the South African Reserve Bank voted in favour of leaving interest rates unchanged at 5.75%.
Traders are cautious ahead of the rate announcement as many are betting that the central bank will choose to leave rates unchanged, others however are forecasting for a rate increase after recent data showed that inflation rose and as the Rand weakens.
Earlier in the session, the Pound received support from the release of better than expected retail sales data. Gains were restrained however due to the release of more disappointing data from the Eurozone and concerns that inflation in the UK is set to fall over the coming months.
According to the UK’s Office for National Statistics, retail sales increased by 0.8% last month, beating forecasts for a gain of 0.4%. On a yearly basis, sales increased by 4.3% from 2.7% and were better than expectations for a rise to 3.14%.
Despite the strong sales figures, economists were concerned as the report also showed that prices tumbled by 1.5% on a yearly basis. Some economists warned that the UK could be heading towards a period of deflation.
More weak data out of the Eurozone also weighed upon the Pound as the Bank of England highlighted the weakness of the currency bloc as one of the main threats to the UK’s economic recovery.
The Pound to South African Rand (GBP/ZAR) Exchange Rate Forecast
The GBP/ZAR currency pair is likely to experience movement as the session progresses and the Rand could make gains if the SARB surprises the market by hiking rates.
If rates are left unchanged, we can expect the Pound to advance, as other factors will weigh on the Rand such as concerns over the nation’s energy supplies and falling commodity prices.
The SARB interest rate decision will be announced at 13:00 pm GMT
