Chance of Greater GBP/ZAR Exchange Rate Gains on Bank of England (BoE) Optimism
The Pound (GBP) has risen by 0.7% against the South African Rand (ZAR) today, but this is mainly down to the devaluation of the latter currency.
UK news has been unsupportive for the most part, with economists at the British Chambers of Commerce (BCC) warning about slowing UK economic growth.
Looking ahead, the Pound might be able to make some gains of its own against the South African Rand on Thursday, after a key Bank of England (BoE) meeting.
BoE policymakers will be discussing any possible adjustments to interest rates, although Thursday’s meeting isn’t expected to bring any immediate change.
Of greater interest will be the BoE’s minutes from the meeting, as well a press conference given by BoE Governor Mark Carney.
If both the minutes and Mr Carney hint at an interest rate hike in the coming months, the GBP/ZAR exchange rate could rise sharply.
UK GDP Downgrade Risks Pound to South African Rand (GBP/ZAR) Exchange Rate Losses
Beyond the BoE interest rate decision, the Pound to South African Rand (GBP/ZAR) exchange rate could also be affected by finalised UK GDP growth rate figures for Q1.
These readings will be out on 29th June and are predicted to confirm a quarter-on-quarter and year-on-year slowdown.
The Pound has recently been battered by warnings that there could be slower UK GDP in 2018 and 2019, so these results might have an amplified negative effect.
If GDP growth is confirmed to have slowed in Q1 2018 then the Pound (GBP) could tumble against the Rand (ZAR), given the negative implications of such a result.
South African Rand to Pound Exchange Rate Forecast: Chance of ZAR/GBP Turbulence on Inflation Rate Data
Before this week’s BoE interest rate decision, the South African Rand (ZAR) could make more immediate movement against the Pound (GBP) on inflation rate data.
Out on Wednesday morning, the ZA figures for May are predicted to show growth for the year-on-year reading but no major change for core annual inflation.
The top end of the South African Reserve Bank’s (SARB) inflation target range is 6%; if inflation slows and moves away from this range then the Rand could be weakened.
Danger of Additional ZAR/GBP Exchange Rate Losses on Current Account Slowdown
Another factor that risks causing South African Rand to Pound (ZAR/GBP) exchange rate losses this week is Thursday’s current account reading for Q1 2018.
The figure measures the national trade balance, net income and net payments and is expected to show an expansion of the longstanding deficit.
A forecast-matching shift from -137bn to -177bn on Thursday could significantly weaken the Rand, leading to greater losses against the Pound.
Warning about the likelihood of a larger current account deficit, Rand Merchant Bank Economist Isaah Mhlanga said:
‘A combination of weak exports, due to poor production and weaker external demand, and high imports will push the current account deficit higher.’