Pound to South African Rand Exchange Rate Advancing More Easily amid Rand Weakness
After a week of poor UK data and rising Bank of England (BoE) interest rate cut bets weighing on the Pound’s (GBP) potential for gains, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate finally found stronger support today.
Weakness in the South African Rand (ZAR) made it easier for GBP/ZAR to climb from 18.76 to 18.82 throughout last week.
This week though, GBP/ZAR has already seen an even stronger jump. GBP/ZAR touched on a monthly high of 18.97 this morning, and the pair remains high near the level of 18.94 at the time of writing.
While today’s UK job market data didn’t totally offset Bank of England interest rate cut bets, the stronger than forecast data still helped the Pound to sustain most of this week’s gains. Meanwhile, the Rand continues to be pressured by South African economic concerns.
Pound (GBP) Exchange Rate Outlook Finds Support as UK Job Market Report Beats Expectations
Following last week’s sets of disappointing UK ecostats, the Pound has finally found some stronger support in data this week so far.
This morning saw the publication of Britain’s latest job market results. The data beat expectations in some notable prints.
Britain’s employment change figures came in at 208k rather than 104k – double the expected number of new jobs.
On top of this, wages including bonuses remained at 3.2% rather than slowing to 3.1% as expected.
In response to the data, some analysts argued that a January interest rate cut from the Bank of England (BoE) was less likely. According to Samuel Tombs from Pantheon Macroeconomics:
‘The outlook for strong wage gains makes it hard for the MPC to justify cutting Bank Rate now in order to meet its primary objective of ensuring that CPI inflation remains close to its 2% target.’
This made it easier for the Pound to sustain gains this morning.
South African Rand (ZAR) Exchange Rates Weak amid Poor South African Economic Outlook
The South African Rand has been one of the worst performing major currencies of the past month. Concerns about South Africa’s economic outlook have hit the currency hard.
Political uncertainties, including stress from a persisting South African energy crisis, are only compounding domestic economic concerns.
The International Monetary Fund (IMF) cut its South Africa growth forecasts in recent sessions as a result. This has only dampened Rand strength further.
According to Warrick Butler from Standard Bank:
‘The Rand has underperformed other risky assets during this period but that ties into cyclical demand and the dire fundamental position of the country.’
Pound to South African Rand (GBP/ZAR) Exchange Rate Awaits Further Data to Influence Bank Outlook
While some analysts believe a Bank of England (BoE) interest rate cut as soon as next week is now looking less likely, investors are still highly anticipating this week’s still-to-come UK data.
Thursday’s factory and retail data from the Confederation of British Industry (CBI) could be influential, but Friday’s PMI projections for January will be even more noteworthy.
The PMIs will be the biggest indication yet of how Britain’s economy is performing at the beginning of 2020. If the data beats forecasts, it will soften concerns about the economy’s poor performance towards the end of 2020.
As a result, while Sterling’s advances could remain supported by job data and lower BoE rate cut bets, investors will remain anxious about upcoming data.
The South African Rand will also remain sensitive to South African data, due to the recent market focus on the nation’s economic outlook.
As a result, the Pound to South African Rand (GBP/ZAR) exchange rate outlook could shift if tomorrow’s South African inflation report surprises investors.