GBP/ZAR: How high can the pound to rand reach?

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on May 25, 2023
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  • The GBP/ZAR pair has been in a strong bullish trend for months.
  • The SARB will deliver another rate hike on Thursday.
  • It will likely signal an end to the hiking phase.

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The pound to rand exchange rate moved sideways ahead of the important interest rate decision by the South African central bank. The GBP/ZAR pair was loitering at 24, a few points below its all-time high of 24.46. In all, the pair has jumped by over 27% from the lowest level in 2022.

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SARB decision ahead

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The South African rand has been in the spotlight this week as investors focus on key events from the country. Data published on Tuesday showed that the headline consumer price index (CPI) dropped from 7.1% in March to 6.8% in April. That was a bigger decline than the median estimate of 7.1%. 

South Africa’s inflation also dropped from a month earlier. It dropped from 1.0% in March to 0.4% in April. Similarly, core inflation dropped to 0.5% and 5.3%, respectively. These numbers mean that the country’s inflation is moving in the right direction.

The same situation happened in the UK, where the headline consumer inflation dropped to 8.7% from the previous 10.1%. UK’s core CPI, which excludes the volatile food and energy prices, rose to 6.8%, signaling that the Bank of England has more work to do to fight inflation.

As I wrote in this article, the next important catalyst for ZAR will be the upcoming interest rates decision by SARB. Analysts believe that the South African central bank will hike interest rates by another 0.25% and bring the official cash rate to 8%. It will then signal that it will pause hiking rates going forward to give room for the past hikes to work.

GBP/ZAR forecast

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GBP/ZAR chart by TradingView

The GBP to ZAR exchange rate has been in a spectacular rally in the past few months as the South African rand sell-off has intensified. This week, the pair has slammed its brakes as investors wait for the upcoming SARB rates decision. The pair remains above the 50-day and 100-day exponential moving averages (EMA) while the MACD has moved above the neutral point.

Therefore, the GBP/ZAR price will likely continue rising as buyers target the next key level at 24.38. A move above that level will see the pair jump to the next resistance point at 25. The alternative scenario is where the pair pulls back and tests the key support at 23.

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