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Pound South African Rand (GBP/ZAR) Exchange Rate Slips as South African GDP Beats Expectations

March 6, 2018 - Written by Toni Johnson

South African Rand (ZAR) Exchange Rates Trade Higher as SA GDP Smashes Forecasts

The Pound South African Rand (GBP/ZAR) exchange rate stumbled on Tuesday, falling as markets reacted to an upbeat GDP reading for South Africa.

According to StatsSA and Statistician-General of South Africa, Risenga Malukeke, the nation’s GDP grew by 3.1% quarter-on-quarter in Q4 2017, up from the previous period’s 2.3% and smashing the forecast of 1.5%.

On a yearly basis, GDP increased by 1.5%, up from the previous 1.3% and the forecast of a drop to 1.0%.

This was largely driven by the strength of the agriculture industry rebounding from one of the worst droughts in recent South African history, with bumper maize crop and other agricultural commodities seeing a whopping 17.7% production rise in 2017, compared to 2016.

Nonetheless, markets continue to step hesitantly around the South African Rand due to concerns over recent Constitutional changes that allow the expropriation of land without compensation, a decision that effectively endangers any investment made into the region.

New President, Cyril Ramaphosa has since tried to limit the negative response to this news by asserting that there will be no ‘smash and grab’, but he has not backed down on his intentions to expropriate land owned by whites, stating that ‘this original sin that was committed when our country was colonized must be resolved in a way that will take South Africa forward’.

This is significant for the markets because confiscating white-owned farms could ravage the agricultural sector - the largest contributor to South African GDP.

Pound (GBP) Exchange Rates Remain Limited by Brexit Negotiation Stagnation

Pound (GBP) exchange rates continued to remain under the thumb of the Brexit negotiation process on Tuesday, limited by ongoing concerns that a lack of progress will extend this period of uncertainty for British business and potentially hurt economic growth.

Lacking much in the form of pertinent UK ecostats today markets have largely been left to focus on Brexit and talk of a global trade war, with the risks of the latter ramping up slightly in the eyes of investors after the EU revealed preparations to impose tariffs on some €2.8bn ($3.5bn) of American goods.

This would be a tit-for-tat response, however, with the EU claiming that it would only levy the tariffs if US President Donald Trump went ahead with his tariffs on steel and aluminium.

Some analyst are sceptical of this threat, however, with the EU already having a sizable trade surplus with the US meaning they effectively have a lot more to lose.

Nonetheless, this news weighed on Sterling on a rather volatile, inconsistent trading day.

Pound South African Rand (GBP/ZAR) Exchange Rate Forecast: BoE Haldane’s Speech and Rate Hike Prospects

The Pound South African Rand (GBP/ZAR) exchange rate could see movement tonight depending on the sentiment revealed in a speech by Bank of England (BoE) Chief Economist Andy Haldane.

Mr Haldane is currently regarded as neither hawk nor dove, but centrist, having called for patience in monetary policy adjustments in early February.

With data from the UK proving upbeat since then, however, his perspective could have shifted.

Although it is unlikely that Mr Haldane will provide direct forward guidance for the markets, a hawkish or optimistic tone could give Sterling a shot in the arm, particularly with investor anticipation rising for a potential rate hike as early as May this year.
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