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Pound South African Rand (GBP/ZAR) Exchange Rate Improves as South African Manufacturing Production Falls in June

August 8, 2019 - Written by John Cameron

GBP/ZAR Exchange Rate Edges Higher on South African Economic Woes

The Pound South African Rand (GBP/ZAR) exchange rate rose today, leaving the pairing fluctuating around R18.227.

The South African Rand (ZAR) fell following yesterday’s publication of the year-on-year South African Manufacturing Production Index for June, which fell below the expected 1.8% increase to -3.2%.

Meanwhile, South Africa’s public electricity company, Eskom, is remaining in focus as its financial woes continue, leaving many South African Rand traders feeling jittery.

Many economists are commenting that this could cause the ratings agency Moody’s to downgrade South Africa’s economic status in November.

Dawie Roodt, a Senior Economist at Efficient, commented:

‘South Africa is in a serious financial position and it's possible to get a downgrade. The damage that was inflicted on Eskom is not something that can be turnaround in months, it needs years. State coffers are empty.’

Professor Jannie Rossouw, the Head of the School of Economic Business Sciences at the University of Witwatersrand, also commented:

‘All these rating agencies have been warning about Eskom's situation and we might find ourselves in trouble because of it.’

GBP/ZAR Exchange Rate Rises despite Sinking House Price Balance Figures for July

The Pound rose against the South African Rand today despite weaken RICS Housing Price Balance figures for July, which fell to a worse-than-expected -9%.

Simon Rubinsohn, a Chief Economist at RICS, said:

‘[These provided] little comfort for the market. The forward-looking metrics on prices and sales also seem to be losing momentum as concerns… about Brexit and political uncertainty heighten.’

However, Brexit concerns still remain in focus for Pound traders today, with fears rising that Prime Minister Boris Johnson’s political advisor, Dominic Cummings, being perceived as pushing forward on a October 31 Brexit – with or without a mutual withdrawal agreement.

Party political tensions have also mounted, with Chuka Umuna, the Liberal Democrat MP, saying:

‘[No-deal fears] will all come to nothing so long as there is the continuing alliance between at least 25 Labour MPs, including eight frontbenchers, and most Tory MPs who persist in voting against legally binding measures to stop a no-deal Brexit in the House of Commons.’

GBP/ZAR Outlook: Sterling Could Sink on Weak UK Growth Figures

Pound traders will be looking ahead to tomorrow’s publication of the flash UK growth figures for the second quarter.

As these are expected to ease from 0.5% to 0%, we are likely to see the GBP/ZAR exchange rate begin to ease.

Meanwhile, South African Rand traders will be paying close attention to global trade developments.

If US-China trade relations improve, this could provide some uplift for the risk-correlated South African Rand.

The GBP/ZAR exchange rate is likely to fluctuate this week on heightened no-deal Brexit fears, as negotiations between the UK and the EU are showing no signs of improving any time soon.

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