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Pound to South African Rand Exchange Rate Outlook Slumps on Bank of England (BoE) Rate Cut Bets

Bank of England

Pound to South African Rand Exchange Rate Tumbling after Friday’s Recovery

Concerning South African production stats helped the Pound Sterling to South African Rand (GBP/ZAR) exchange rate to recover at the end of last week. However, the pair is already falling again this morning as Pound (GBP) investors react to Bank of England (BoE) news.

After opening last week at the level of 18.71, recovery in global risk sentiment left GBP/ZAR trending lower.

However, after touching a low of 18.38, GBP/ZAR rebounded and actually ended up closing higher for the week, in the region of 18.76.

This morning though, Bank of England speculation clouded over the Pound outlook. The Pound to South African Rand exchange rate trends lower, in the region of 18.65, at the time of writing.

Pound (GBP) Exchange Rate Outlook Hit by Sudden Rise in Bank of England (BoE) Speculation

The Pound tumbled when markets opened today, in some cases shedding much of the gains it saw last week. This was due to reaction to weekend comments from Bank of England (BoE) officials.

BoE policymaker Silvana Tenreyro said that unless UK growth did not improve, she would be willing to vote to cut UK interest rates.

This was followed by comments from Gertjan Vlieghe on Sunday. He said that unless there was a notable improvement in data soon, he would vote for a rate cut sooner rather than later.

Sterling slumped in reaction when markets opened. Its gains were only exacerbated, following the publication of today’s disappointing UK ecostats.

Britain’s monthly growth rate fell to -0.3% in November, and the latest production stats showed deeper than expected contractions. These figures made analysts more confident that a BoE rate cut was likely sooner rather than later.

South African Rand (ZAR) Exchange Rate Outlook Limited by Poor South African Data

The South African Rand (ZAR) is advancing against the Pound this morning. This is largely due to broad Pound weakness, rather than strength in the Rand.

The Rand is benefitting slightly from global risk and trade-sentiment. Last week’s US-Iran military tensions appear to have lightened, and the imminent signing of a US-China ‘phase one’ trade deal is also supporting risk-on movement.

However the Rand remained less appealing than other Pound rivals, due to concerns such as South Africa’s ongoing energy crisis.

Weak South African manufacturing production data, which caused the Rand’s Friday tumble, also continued to weigh on the currency’s appeal today.

Pound to South African Rand (GBP/ZAR) Exchange Rate Could Tumble Lower if UK Data Continues to Disappoint

Today’s UK data has only caused Bank of England (BoE) interest rate cut speculation to rise. Analysts and investors now expect that a rate cut from the bank on the 30th of January is quite likely.

As a result the Pound could be in for sessions of weak performance this week, especially if upcoming UK data continues to disappoint.

Wednesday will see the publication of Britain’s December inflation data, which could cause deeper BoE rate cut bets if they fall short. Friday’s retail sales results could also be influential.

While the Pound outlook will be driven more by data this week, upcoming South African data could be influential for the South African Rand.

South African consumer confidence data is due tomorrow, with retail sales on Wednesday and the South African Reserve Bank’s (SARB) January policy decision on Thursday.

If the SARB shows even more concern about South Africa’s economic outlook due to recent data and energy issues, the South African Rand could see fresh weakness and the Pound to South African Rand (GBP/ZAR) exchange rate may advance again.