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Pound to South African Rand Exchange Rate Outlook Volatile amid Poor UK Data and Recovering Trade-Sentiment

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Pound to South African Rand Exchange Rate Sheds Gain Attempts as Markets Recover from Oil Shock

Both the Pound (GBP) and South African Rand (ZAR) have seen mixed sharp movement this week, leaving the Pound Sterling to South African Rand (GBP/ZAR) exchange rate highly volatile. The pair was tumbling today on a combination of UK data and a recovering Rand.

In what looks to be another week of fluctuations for GBP/ZAR, the pair has ultimately not sustained much movement since opening this week at the level of 18.22.

GBP/ZAR touched on a weekly high of 18.45 yesterday afternoon, but at the time of writing had shed much of those gains and trended near the level of 18.24 again.

With Bank of England (BoE) and South African Reserve Bank (SARB) policy decisions set to be held tomorrow, there may be further volatility ahead for the Pound to Rand exchange rate as well.

Pound (GBP) Exchange Rate Losses Deepen as UK Inflation Falls Short of Expectations

The Pound’s broad weakness in recent months has seemingly not led to a rise in inflation like it did after the Brexit referendum in 2016.

The Pound’s support was already mixed this week due to persisting no-deal Brexit fears, and this morning’s UK inflation report has only further weakened Sterling’s appeal.

UK inflation was forecast to rise to 0.5% in August, but only advanced from 0.0% to 0.4%. The year-on-year figure slowed from 2.1% to 1.7%, rather than the expected 1.9%.

Core inflation prints also disappointed, coming in at 0.4% month-on-month and 1.5% year-on-year.

The data didn’t have a significant impact on Bank of England (BoE) interest rate speculation, but there was now less for investors to be bullish on the Pound about ahead of tomorrow’s BoE policy decision.

South African Rand (ZAR) Exchange Rates Bolstered by Risk-Sentiment and Inflation Report

After being hit hard by the sharp gains in oil prices at the beginning of the week, the South African Rand (ZAR) is trading with more solid footing today and has recovered much of its losses.

As South Africa is a heavy importer of oil, the weekend’s Saudi oil attack and following surge in oil prices left the Rand a lot less appealing.

However. Saudi Arabia’s energy minister said in a speech yesterday that the nation would restore lost oil production by the end of September. This caused oil prices to fall back.

As oil supply fears softened a little, risk and trade-sentiment improved and the Rand has been recovering since then.

The Rand’s recovery was further supported today by South Africa’s August inflation rate report, which came in slightly above expectations.

Pound to South African Rand (GBP/ZAR) Exchange Rate Focused on Central Bank News

There are a couple more notable UK and South African ecostats due out this week, but the focus will mostly turn towards central bank news and speculation in the coming days.

The Federal Reserve will hold its anticipated September policy decision tonight, which could inspire shifts in global risk-sentiment if the bank takes a surprising tone on the US economy or monetary policy outlook.

Then tomorrow, both the Bank of England (BoE) and South African Reserve Bank (SARB) will hold September policy decisions. No big surprises are expected from either, so any unexpected shifts in tone could cause GBP/ZAR movement.

Tomorrow’s data including UK retail sales and South African building permits could also cause some movement if they miss forecasts.

Overall though, possible developments in UK politics and Brexit are the most likely factors to influence the Pound (GBP). According to Sam Cooper at Silicon Valley Bank, discussing today’s UK inflation data:

‘While the data will likely cause a knee-jerk sell-off in Sterling and stoke some volatility, market focus and long-term direction will continue to be driven by parliamentary and Brexit developments’

As a result, the Pound to South African Rand (GBP/ZAR) exchange rate outlook will continue to be driven by UK politics, as well as any upcoming surprises in central bank news and speculation.