Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast to Soften as UK Trade Deficit Widens

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate ticked lower by around -0.36% on Thursday morning.

After British economic data produced mostly disappointing results, with particular reference to the trade deficit, the Pound softened versus many of its major peers. With the Bank of England (BoE) highlighting an improved trade balance as one of the prerequisites to cash rate normalisation, the latest figures will likely feature heavily in future policy meetings.

The South African Rand, meanwhile, strengthened despite ongoing issues with its leading energy provider Eskom. The appreciation is partly to do with expectations that the Federal Reserve will delay rate hikes for some time to come, and also as a result of the Rand tracking Euro gains.

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is currently trending in the region of 17.5080.

Pound Sterling (GBP) Exchange Rate Softens on Disappointing Data

UK Trade Balance declined well beyond the median market forecast figure, causing the Pound to slide versus the majority of its most traded peers. With a trade deficit of -£2.859 billion the Labour Party will have fodder against the Conservatives which could fuel speculation of a major change in policy.

Additionally, the BoE stated previously that improved trade balance was one of the key requisites for policy normalisation. This is likely to hold off a sooner-than-expected rate hike. The interest rate decision, due to be announced later on Thursday, is very likely to see borrowing costs kept on hold until after the general election.

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate dropped to a low of 17.4640 today.

South African Rand (ZAR) Exchange Rate Strengthens on Euro Gains

As the Euro strengthens amid speculation that Greece will meet with its promise of repaying the International Monetary Fund (IMF) on time, the South African Rand appreciated as it tracks the single currency gains.

Also aiding the Rand was the Federal Open Market Committee (FOMC) minutes from their latest policy decision. Although the minutes showed some policymakers had pushed for a June rate hike, the meeting came before recent disappointing data. Given that those dissenting policymakers highlighted positive data as a reason to increase the benchmark interest rate, the recent string of poor data results is likely to see those policymakers reconsider their positions.

Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast to Hold Losses

Although the BoE rate decision could provoke changes for the Pound, there is unlikely to be any significant developments. Therefore, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate is likely to hold losses for the remainder of Thursday’s European session. South African Manufacturing Production data may also impact upon the GBP/ZAR pairing.

Friday ought to see heightened GBP/ZAR volatility with several British data publications due for release. Euro movement and US Dollar movement will be key for dictating Rand changes.

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate advanced to a high of 17.6100 today.