The South African rand (GBP/ZAR) exchange rate was lower so far today as a risky mood supports the rand (ZAR) while bank of england (BoE) headwinds are undermining 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.
British Pound (GBP) exchange rate sentiment dampened by Dovish BoE
The Pound is trending lower against many of its peers this morning as dovish messages from the Bank of England continue to weigh on Sterling sentiment.
As the UK consumer credit report showed higher than expected borrowing for February, investors appear to be focused on cautious comments from BoE Governor Andrew Bailey, who pointed out yesterday 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 increase in consumer credit since March 2017, with a net increase split between £1.5bn in credit card borrowing and £0.4bn borrowing through other forms of credit such as car dealer financing and personal loans.
Meanwhile, analysts at HSBC Bank report that the BoE’s recent dovish stance, combined with March’s 25 basis point rate hike, is likely to prolong the bearish theme over the coming weeks, capping tailwinds to the pound.
Representatives of the bank remarked: “We believe the shadow cast by the BoE meeting on the GBP will linger in the coming weeks, especially if BoE members continue their dovish refrain.
[We] expect the BoE to hike 25 basis points at each of the next three meetings, bringing the key rate to 1.50% this year. However, this is still considerably more accommodative than the market curve. As such, the risks to the GBP are on the downside.
South African Rand (ZAR) Exchange Rate Supported by Risk Flows and Employment Data
The South African rand is enjoying gains against several currencies today as an overall risky mood supports upbeat employment data.
Negotiations in Turkey between Turkish and Russian officials seem to inspire hope that progress is being made in deactivating the conflict in Ukraine, although the proceedings are slightly marred by insinuations of an attempted poisoning.
Present at the meetings was Russian businessman Roman Abramovich, who reportedly suffered symptoms consistent with poisoning during a series of informal talks earlier this month.
Despite Ukrainian Foreign Minister Dmytro Kuleba’s advice to anyone negotiating with the Russian Federation “not to eat or drink anything, and preferably avoid touching any surface”, the Kremlin spokesman, Dmitry Peskov assured the media that:
“These reports [of a poisoning] are not true… This is part of information panic, information sabotage, information warfare.
Nevertheless, Sinan Ülgen of the Istanbul think tank, the Center for Economics and Foreign Policy Studies (EDAM), is cautiously optimistic:
‘We can read in [Abramovich’s presence] as the receptivity of kyiv and Moscow to Turkey’s involvement. Not only does Turkey formally act as a facilitator, but it also plays an active role in this second diplomatic channel to defuse the conflict.
Also providing support for the rand, South Africa’s unemployment rate in the last quarter of 2021 came in at 35.3%, 1% lower than expected, although higher than in the third. trimester.
Although the number of unemployed increased by 278,000 to 7.9 million, employment increased by 262,000 and the labor force reached 22.5 million in the fourth quarter. Job losses were mainly seen in manufacturing and construction, while private households, trade, and community and social services recorded job gains.
GBP/ZAR Exchange Rate Forecast: Will Central Bank Dynamics Affect Rates?
Going forward, the Bank of England’s stance on Britain’s economic outlook may influence the South African Pound exchange rate tomorrow, given the lack of meaningful data.
Policymaker Ben Broadbent is due to speak at 10.10am and could strike a more hawkish tone than Governor Andrew Bailey – although in a speech last month Broadbent warned the UK is going through its toughest time for monetary policy since 1992.
Meanwhile, the situation in Ukraine also has the potential to influence the GBP/ZAR. If the talks continue to progress well, both currencies could benefit from favorable risk winds.