Pound to South African Rand Exchange Rate Weakens on UK GDP Disappointment

April 28, 2015 - Written by Ben Hughes

STORY LINK Pound to South African Rand Exchange Rate Weakens on UK GDP Disappointment

Pound to South African Rand Weakens on UK GDP Disappointment

The Pound to South African Rand exchange rate weakened by more than 0.40% after the UK currency was dragged lower by worse than forecast Gross Domestic Product (GDP) growth rate data. The South African Rand meanwhile followed the Euro higher as it received support from increased optimism that a deal will be reached between Greece and its European creditors.

The Rand began to firm late in Monday’s session as it tracked the Euro higher against a number of major peers. The Euro was boosted by renewed optimism that a solution to Greece’s debt problems would be reached. A decision by Greek Prime Minister Alexis Tsipras to reshuffle his negotiation team was seen as a positive move by observers.

‘Greece accounts for the change in the Rand outlook. Whereas last week it seemed we were set for another default, his week it’s all about compromise,’ said Rand Merchant bank analyst John Cairns.

Sterling fell as data released by the London based Office for National Statistics (ONS) intial estimate of first quarter GDP growth showed that the UK economy grew at its slowest pace since 2012. Growth halved to just 0.3% from the 0.6% seen in the previous quarter and was well below half of the 0.5% growth rate forecast by economists.

‘The economy expanded a little more slowly in the first quarter of 2015 than we’ve seen in the past two years and that’s largely due to the services sector, where growth has eased to 0.5%. In addition, there has been a further fall in construction output that itself takes around 0.1% off the GDP growth rate. But, as always, we warn against reading too much into one quarter’s figures,’ said ONS chief economist Joe Grice.

The data will increase pressure on the Conservative and Liberal Democrat parties as both parties have campaigned extensively on their handling of the UK economy whilst in a coalition. With just nine days to go until the general election, the GDP data could not have come at a worse time. The uncertain outcome of next week’s vote was also continuing to weigh upon the Pound Sterling.

Further gains for the South African Rand are forecast to be short-lived as the currency remains under pressure from concerns over the recent xenophobic violence that has rocked parts Africa’s most advanced nation. Worries over the nation’s unreliable power grid and possible labour strikes are also set to weigh.

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