Pound South African Rand Exchange Rate News: GBP/ZAR nosedives Following Chinese Data Dump

July 15, 2019 - Written by John Cameron

STORY LINK Pound South African Rand Exchange Rate News: GBP/ZAR nosedives Following Chinese Data Dump

South African Rand (ZAR) Roars Higher on Chinese Data

The South African Rand (ZAR) shot higher against the Pound (GBP) and the majority of its other peers on Monday as market risk appetite was improved by a slew of economic data published by China, the focus of which being China’s latest GDP figures.

Whilst Chinese economic growth was reported to have struck a 27-year low in the second quarter as growth slowed to 6.2%, as the US-China trade war took its toll on the economy, market risk sentiment appeared to improve following the GDP release.

This is likely due to expectations that the Beijing will respond to the slowdown by injecting fresh stimulus into the economy.

Commenting on the data Larry Hu, an economist at Macquarie said:

‘We expect stimulus to escalate around Q4 2019, when policy makers would put economic growth as the top priority again. At that time, they would lower interest rates to support the property sector, loosen regulation to boost infra spending, and roll out measures to stimulate consumer durable goods such as auto and home appliance.’

This bodes well for commodity-linked currencies such as the South African Rand as it should help to ensure that Chinese demand for raw materials remains fairly robust.

Also supporting the upbeat outlook was the Chinese data accompanying the GDP release, with both industrial production and retail sales coming in well above expectations in June, suggesting China’s economy could bounce back in the coming months.

Pound (GBP) Exchange Rates Dented by Brexit Jitters

Meanwhile, the Pound (GBP) faced broad losses on Monday as Brexit uncertainty continued to drag on the currency.

This came in the wake of reports that up to 40 MPs have vowed to block a Brexit deal that would be close to Theresa May’s withdrawal agreement.

This will likely thwart Boris Johnson’s plans to go back to the EU to tweak the Irish backstop but largely leave the rest of May’s deal unchanged.

With Johnson widely expected to become Prime Minister later this month and having vowed to leave the EU in October, this has stoked fears that he will abandon the deal altogether and commit to a no-deal Brexit.

GBP/ZAR Exchange Rate Forecast: Will a Rebound in UK Wage Growth Prompt a Rally in Sterling?

Looking ahead, the main catalyst of movement in the Pound South to African Rand (GBP/ZAR) exchange rate in the first half of this week looks set to be the publication of the UK’s latest economic data.

Economists forecast the employment figures will show that unemployment held at a 44-year low in May, with the jobless rate expected to have held at 3.8%, likely putting the focus on the accompanying earnings figures.

This may provide some support to Sterling if earnings began to pick up again in May as suspected, with wage growth expected to have climbed from 3.4% to 3.5%.

This will be quickly followed by the UK’s latest CPI figures on Wednesday, although with inflation expected to have remained flat last month and the Bank of England’s next move more likely to be a rate cut rather than a hike, any result upside in the Pound may prove limited.

Meanwhile, the focus for ZAR investors will be on the South African Reserve Bank’s (SARB) rate decision on Thursday.

This may cast the Rand lower in the second half of this week as the bank is widely forecast to cut rates this month in an effort to stimulate South Africa’s ailing economy.

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TAGS: Pound Rand Forecasts