Pound to Rand Exchange Rate News: Today's Value at Lows not Seen Since Late July

August 17, 2017 - Written by Frank Davies

STORY LINK Pound to Rand Exchange Rate News: Today's Value at Lows not Seen Since Late July

The Pound to Rand exchange rate is currently valued at just 16.93454, ending the week at fresh lows not seen since late July this year.

GBP Advances as Traders Process UK Sales Slowdown

The Pound has fluctuated significantly today, moving on a rollercoaster-like pattern because of trader reactions to UK retail sales figures.

In July, sales have slowed on the month and the year, with the exception being the monthly figure with fuel included.

The general reaction is that the results were not as bad as expected, which has triggered a Pound advance against peers like the Rand.

Giving a long-term outlook on the data was EY Item Club economist Howard Archer;

‘ The squeeze on consumers should progressively ease in 2018 due to inflation falling back markedly (as the impact of Sterling’s sharp fall drops out). However, earnings growth will likely remain relatively muted and employment may well lose momentum’.

In the more immediate future, however, Archer foresees turbulence on present uncertainties;

‘Consumer confidence is brittle and caution over making major purchases appears to have been reinforced by heightened economic, political and Brexit uncertainties’.

ZAR Declines on Range of Gloomy Forecasts

The South African Rand has fallen against the Pound today, primarily on political news. For the South African currency, this depreciation has come at a time of intense scrutiny over the future of the national economy.

Ratings agency Moody’s has recently issued a tentative growth forecast for South Africa, of 0.5% in 2017.

This low estimate has been shaped by fears about poor economic policies, high unemployment and high levels of government debt.

In other news, however, there have been growing hopes that African National Congress (ANC) dissenters may stick around to criticise President Jacob Zuma.

Ever since a secret vote of no confidence last week failed to dislodge Zuma from power, there has been a witch-hunt to determine which ANC members voted against their controversial leader.

If these dissenters are not expelled the ANC, they could remain to challenge Zuma in the future, which would raise the chances of his controversial leadership being cut short.

Elsewhere, signs that the US Federal Reserve may not raise interest rates in the near-term have failed to push the Rand higher against the Pound.

Weekly GBP ZAR Exchange Rate Forecast: UK Government Debt and GDP Growth in Focus Next Week

Looking ahead to next week’s economic news, the UK will have a larger spread of economic news compared to South Africa.

Opening off weekly news will be government borrowing figures for July. Previously in June, a deficit figure of -6.28bn was reported. If this shows significant movement towards the surplus range, then the Pound may advance against the Rand.

That said, the UK has posted a trade deficit for four months in a row this year, so this pattern may continue in July instead of being broken.

The next economic news will be Tuesday’s Confederation of British Industry (CBI) reported industrial orders, covering August. Orders have remained positive in 2017, so another rise could provide an early-week boost to the Pound.

These initial data releases aside, the main event next week will be Thursday’s second estimates for UK GDP in the second quarter. Estimates are for a quarter-on-quarter rise to 0.2%, but the annual GDP rate is predicted to fall from 2% to 1.7%.

Annual figures are typically more high-impact than quarterly ones, so the Pound could decline against the Rand on such news.

The only South African data to speak of next week will be Wednesday’s core inflation figures for July. Estimates are for core annual inflation to hit 4.7%, while the base annual rate is projected to hit 5.4%.

Both of these results would put inflation within the South African Reserve Bank’s (SARB) target range, so the Rand could appreciate on the news.

The Rand could also see some minor movement next week from precious metal prices, particularly if metals like gold see a dramatic increase in costs.

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TAGS: Pound Rand Forecasts