Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast: SARB Interest Rate Hike Shores up Rand
After the South African Reserve Bank (SARB) opted to raise interest rates yesterday the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has slumped to a three-week low.
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UK GDP Report Disappoints to Soften Pound (GBP), Rand (ZAR) Boosted as Markets Rally
While the fourth quarter UK GDP failed to offer any particular surprise to investors, with growth slowing from 2.1% to 1.9% on the year as forecast, this nevertheless offered only limited support to the Pound (GBP). Pundits were concerned to find that the service sector continued to be the main driving force behind the recovery of the domestic economy, with manufacturing growth persistently flat as efforts to rebalance the economy show little sign of paying off. As the UK remains vulnerable to downside risks from global slowdown pressures there remains little motivation for the Bank of England (BoE) to consider an interest rate hike in the near future.
As global stock markets continued to rally yesterday, on the back of hopes for an oil production cut deal between Russia and the Organisation of the Petroleum Exporting Countries (OPEC), the South African Rand (ZAR) largely benefitted. The Rand was also shored up by the South African Reserve Bank’s (SARB) decision to raise interest rates from 6.50% to 6.75%, a move designed to counter the recent weakness of the risk-sensitive currency. Consequently the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has continued to trend lower towards a three-week low.
Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate on Downtrend despite Stronger UK Consumer Confidence
Despite the GfK Consumer Confidence Survey showing that sentiment in the UK had unexpectedly jumped from 1 to 4 in January, defying the more muted mood of the markets, the Pound has been unable to rally against the dominant Rand. With Prime Minister David Cameron shooting down suggestions that he was approaching a deal with the European Commission over in-work EU migrant benefits ‘Brexit’ concerns have continued to weigh on Sterling ahead of the weekend.
Following the Bank of Japan’s (BoJ) surprise decision to implement negative interest rates stock markets have extended their rally today, despite both Saudi and Russian officials denying any possibility of discussions over oil production. As a result the Rand has strengthened further, despite weaker expectations for this afternoon’s South African Balance of Trade figure.
GBP/ZAR Exchange Rate Forecast: Manufacturing PMIs Predicted to Push Pound Lower
Into next week the Rand may continue to find support if the domestic Manufacturing PMI is shown to have climbed higher at the beginning of 2016, with forecasts suggesting a strong uptick to 46.5. Should sector growth prove disappointing, however, the GBP/ZAR exchange rate is likely to retake some of its recently lost ground.
On the other hand, the UK Manufacturing PMI for January is expected to show a slight decline in sector expansion. As the slowing industry remains of particular concern with regards to the nation’s GDP and continued economic recovery a weaker result here would diminish the appeal of the Pound further.
Current GBP, ZAR Exchange Rates
At the time of writing, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate was slumped around 23.0090, while the South African Rand to Pound Sterling (ZAR/GBP) pairing was making gains at 0.0435.