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Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast to Rally as UK Inflation Headwinds Ease

South African Rand Currency Forecast

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate rallied by around 1.07% on Wednesday afternoon.

British labour market data printed positively on Wednesday, which initiated a Sterling surge versus its major peers. In addition to positive data, the Pound also rallied in response to hawkish sentiment from Bank of England (BoE) policymakers who stated that inflationary headwinds were easing in minutes from the most recent policy meeting.

The South African Rand, meanwhile, softened versus most of its major peers despite a weak US Dollar. The depreciation can be linked to rising SA inflation which has prompted many analysts to speculate that the South African Reserve Bank (SARB) will be forced to intervene in order to combat price pressures.

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is currently trending in the region of 19.5640.

Pound Sterling (GBP) Exchange Rate Forecast to Surge against the South African Rand after Wage Growth Accelerates

British labour market data produced positive results across the board on Wednesday, causing the Pound to soar versus its major rivals. Of particular note was Average Weekly Wages, which saw accelerated growth of 2.7% annually in April. This is great for British consumers given that inflation is predicted to remain low for some time to come.

‘A surge in UK wage growth brings welcome news that the economic recovery is feeling through to pay packets, but also ups the odds of interest rates rising this year … It’s uncertain as to how much pay growth will continue to accelerate, as low inflation will hold down annual pay reviews. However, wage pressures have already built to an extent that would normally start to worry policymakers. Private sector pay excluding bonuses rose at an annual rate of 3.2% in the three months to April, the best seen since 2008 (rates of 3.6% and 3.3% were seen in the single-month data for March and April respectively),’ stated statistics company Markit.

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate dropped to a low of 19.3090 today.

South African Rand (ZAR) Exchange Rate Forecast to Dive versus the British Pound as Price Pressures Rise

South Africa’s inflation data showed consumer prices rose in May. On the year, the Inflation Rate increased from 4.5% to 4.6% and Core Inflation increased from 5.6% to 5.7% annually. Rising price pressures have caused many analysts to speculate that SARB will be forced to intervene in order to control inflation.

‘Inflation is moving to the upper end of the central bank’s target because gasoline prices are rising and food prices are picking up, ‘said Bart Stemmet, economist at NKC African Economics. ‘If power utility Eskom’s application to raise its tariffs by as much as 25% is approved, it will push the Reserve Bank’s inflation forecasts above the target band and that will force them to increase interest rates,’ he added.

South African retail sales data produced mixed results in April. On the year, Retail Sales advanced by 3.4%; bettering the median market forecast 1.8% growth. On a monthly basis, Retail Sales came in at 0.2%; significantly below the market consensus of 1.04% growth.

Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast to Hold Gains ahead of UK Retail Sales

Given the extent of the advance, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate is likely to hold gains for the remainder of Wednesday’s European session. Thursday ought to see GBP/ZAR volatility with British Retail Sales data due for publication. In addition, tonight’s Federal Open Market Committee (FOMC) is likely to impact on demand for the emerging-market South African Rand.

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate reached a high of 19.5920 today.