South African Rand Exchange Rate Forecast Falls on WTO Report

September 28, 2016 - Written by John Cameron

STORY LINK South African Rand Exchange Rate Forecast Falls on WTO Report

The Pound Sterling (currency : GBP) was hit hard in the early part of the week following comments from the European Union’s finance ministers suggesting that post-Brexit Britain will not be permitted to access the single market unless she signs up for freedom of movement of labour. The prospect of the UK losing its free trade status with the other 27 members of the European Union sent shivers down the spine of global investors; however, a leading global institution issued a report on Monday suggesting that there could be much worse to come for the global economy.

World Trade Organisation Report Weakens South African Rand

In a stark warning to market participants, the World Trade Organisation (WTO) counselled that global trade will run at a far lower level than had previously been anticipated in the short-to-medium term. WTO director-general Roberto Azevedo emphatically stated that, ‘the dramatic slowing of trade growth is serious and should serve as a wake-up call, before going on to warn that, ‘it is particularly concerning in the context of growing anti-globalisation sentiment.’

Azevedo finished by asserting that,
‘We need to make sure that this does not translate into misguided policies that could make the situation much worse - not only from the perspective of trade, but also for job creation and economic growth and development, which are so closely linked to an open trading system.’

South African Rand Outlook Declines as World Trade Organisation Cut Expectations for Global Trade

The WTO report contained stark downward revisions to the level of 2016 imports into the world’s main regions. The predicted drop in the level of imports into South America from 4.5% to a heady 8.3% was especially headline-grabbing, while a 1.9% increase in imports to the USA versus a previous forecast of 4.1% was also bad news. If the WTO report is correct, then expect investors to turn against the trade-driven Australian Dollar (currency : AUD), New Zealand Dollar (currency : NZD) and South African Rand (currency : ZAR).

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TAGS: South African Rand Forecasts