Pound to South African Rand (GBP/ZAR) Exchange Rate Surges on Positive UK Data

May 12, 2015 - Written by James Fuller

STORY LINK Pound to South African Rand (GBP/ZAR) Exchange Rate Surges on Positive UK Data

Pound to South African Rand Exchange Rate Surges on Positive UK Data

The Pound advanced strongly against the South African Rand and most other major peers as domestic data out of the UK showed that manufacturing and industrial production data increased more than forecast in March.

According to data released by the London based Office for National Statistics (ONS), showed that industrial production increased 0.5% in March compared to February, when it inched higher by 0.1%. Economists had been expecting production to stagnate. The rise was the strongest growth rate recorded since September 2014. On a year-on-year basis, industrial production increased by 0.7% in March. That figure also beat economist forecasts for a rise of 0.1%.

‘The industrial sector may have turned the corner, no doubt helped by the lower oil price. We remain hopeful that we should see at least a little rebalancing of the economy this year,’ said Vicky Redwood, an economist at Capital Economics.

A separate report also showed that manufacturing production also increased. The data showed that production in the sector increased by 0.4% in March from February, beating forecasts for a figure of 0.3%. The cause for the solid gains was the 4.9% increase in gas and oil extraction. On a year-on-year basis, manufacturing production increased by 1.1%, better than the 1% figure forecast by economists.

Following the release of the data, the Pound soared to its best level since October 2008 and hit a session high of 19.0240.

As the session progressed, the Pound Sterling gave up some of its earlier gains as economic data out of South Africa came in better than forecast. Manufacturing production in Africa’s most advanced economy increased by 3.8% in March as the sector had not been too badly effective by black outs that have plagued the South Africa economy. The 3.8% increase down to higher production in the food and beverages; petroleum and chemical products; and motor vehicles manufacturing divisions. It was not all positive news however as seasonally adjusted manufacturing production, fell by 0.6% in the first quarter of 2015 compared with the fourth quarter of 2014, with six of the 10 manufacturing divisions having reported negative growth rates over the period.

Also offering support to the South African Rand was an easing in expectations that the nation could see its sovereign credit rating be downgraded to junk status. Panellists from the Centre for Development and Enterprise (CDE) said however that if the issues facing the nation’s economy are not tackled than a downgrade is likely to occur in 18-24 months.

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