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The Pound South African Rand (GBP/ZAR) exchange rate has fallen so far today, as a risk-on mood supports the Rand (ZAR) while Bank of England (BoE) headwinds sap support for the Pound (GBP).
At the time of writing, GBP/ZAR is trading at R19.1510, down 0.2% from today’s opening levels.
Pound (GBP) Exchange Rates’ Sentiment Dampened by Dovish BoE
The Pound is trending down against several of its peers this morning as dovish messaging from the Bank of England continues to weigh upon Sterling sentiment.
While the UK’s consumer credit report revealed higher-than-expected borrowing for the month of February, investors appear to be focusing upon cautious comments from BoE Governor Andrew Bailey, who yesterday remarked that the economic situation in the UK remains ‘volatile’.
Generally, increased consumer borrowing indicates increased spending and therefore bodes well for the economy, but current inflationary pressures suggest that people are borrowing more to cover the rising cost of living.
Today’s data showed the biggest rise in consumer credit since March 2017, with the net increase split between £1.5bn of credit card borrowing and £0.4bn of borrowing through other forms of credit such as car dealership finance and personal loans.
Meanwhile, analysts at HSBC bank report that the BoE’s recent dovishness, combined with March’s 25bps rate hike, is likely to extend the bearish theme through the next few weeks, capping GBP tailwinds.
Representatives from the bank remarked: ‘We believe the shadow cast by the BoE meeting over the GBP will persist in the coming weeks, especially if BoE members continue their dovish refrain.
[We] expect the BoE to deliver a 25bp hike in each of the next three meetings, taking the policy rate to 1.50% this year. However, this remains considerably more dovish than the market curve. As such, risks to the GBP are skewed to the downside.’
South African Rand (ZAR) Exchange Rates Supported by Risk Flows, Employment Data
The South African Rand is enjoying upside against several currencies today as an overall risk-on mood lends support alongside upbeat employment data.
Negotiations in Turkey between Turkish and Russian officials appear to inspire hopes that progress is being made in diffusing the conflict in Ukraine, although proceedings are slightly marred by insinuations of a poisoning attempt.
Present at meetings is Russian businessman Roman Abramovich, who reportedly suffered symptoms consistent with poisoning during an informal round of talks earlier this month.
Despite advice from Ukrainian foreign minister Dmytro Kuleba to anyone going through negotiations with the Russian Federation, ‘not to eat or drink anything, and preferably avoid touching any surface’, Kremlin spokesperson Dmitry Peskov has assured the media that:
‘These reports [of a poisoning] are not true… This is part of the information panic, part of the information sabotage, information war.’
Nevertheless, Sinan Ülgen, of the Istanbul think-tank the Centre for Economics and Foreign Policy Studies (EDAM) is cautiously optimistic:
‘We can read into [Abramovich’s presence] as the receptivity of both Kyiv and Moscow to Turkey’s involvement. Not only is Turkey acting formally as a facilitator but it also has an active role in this second track of diplomacy to diffuse the conflict.’
Also lending support to the Rand, South Africa’s unemployment rate in the final quarter of 2021 has printed at 35.3% – 1% less than expected, although higher than in Q3.
Although the number of unemployed persons increased by 278,000 to 7.9 million, employment rose by 262,000 and the labour force reached 22.5 million in Q4. Job losses were primarily observed in manufacturing and construction, while private households, trade and community and social services reported job gains.
GBP/ZAR Exchange Rate Forecast: Central Bank Dynamics to Affect Rates?
Looking ahead, the Bank of England’s stance on Britain’s economic outlook may influence the Pound South African exchange rate tomorrow, given a lack of significant data.
Policymaker Ben Broadbent is due to speak at 10 past 10 and may strike a more hawkish tone than Governor Andrew Bailey – although in a speech given last month, Broadbent warned that the UK is experiencing its most challenging time for monetary policy since 1992.
Meanwhile, the situation in Ukraine also has potential to influence GBP/ZAR. If talks continues to progress well, both currencies may enjoy risk-on tailwinds.
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