The GBP/ZAR currency pair held not far from a 21-week high of 22.9255 on Tuesday, as investors reassessed the Bank of England’s policy trajectory after a notably more hawkish message from the central bank and ahead of the outcome of the South African Reserve Bank’s policy meeting.
Although the BoE opted to leave interest rates unchanged last week, its communication was perceived as more hawkish than markets had anticipated. Policy makers underscored that they would respond if inflation pressures intensify, with particular attention on the impact of higher global energy prices.
This stance prompted an adjustment in UK interest rate expectations. Market participants began to factor in the prospect of several rate hikes, while some investors speculated that the BoE could implement as many as three hikes should elevated inflation persist.
Attention is now turning to the release of flash UK Purchasing Managers’ Index figures, which are expected to provide a timely indication of business conditions across the UK manufacturing and services sectors.
Meanwhile, the SARB is largely expected to keep its benchmark interest rate without change at 6.75% at its March 26th meeting.
The GBP/ZAR currency pair was last up 0.89% on the day to trade at 22.7313.
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