Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast to Strengthen Despite Dismal British Sectoral Growth
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate advanced by around 0.8% on Thursday afternoon.
The UK has suffered a dismal week economically with sectoral growth falling well below expectations in all areas. This has led to Markit downgrading growth outlook to just 0.3% in the first-quarter.
The British Pound softened versus a number of its currency peers, but a spate of correctional trading has limited losses.
British consumers continue to be the driving force behind the UK’s economic growth, but data today showed that even the services sector has taken a dramatic hit from uncertainty regarding the EU referendum.
The Markit Services PMI was forecast to drop slightly from 55.6 to 55.1 in February, but services output actually dropped to 52.8. In response to the disappointing services growth, David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply stated;
‘A maelstrom of sluggish global economic performance and relatively subdued business confidence resulted in a downbeat message in February. The combined pressures from uncertainties around the EU referendum, China and Middle East crowded out any strong optimism for the future. Growth rates for both new work and overall business activity were the lowest since March 2013. Any new business was largely driven by increased marketing and networking efforts, new product launches and pipeline work finally becoming reality, and not from strong demand.’
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is currently trending in the region of 22.0710.
South African Rand to Pound Sterling (ZAR/GBP) Exchange Rate Continues to Dive after World Bank Reduced South Africa’s Growth Outlook
An unhealthy cocktail of political uncertainty and disappointing data has sent the South African Rand tumbling versus its major peers.
South Africa’s President Jacob Zuma survived a no-confidence vote in parliament, but negative sentiment towards the controversial politician has far from abated. He still faces a case of corruption after he was found to have used state funds to pay for massive renovations to his home.
Zuma’s survival is not a good outcome for investors who have lost confidence in the President’s competence after he appointed a little-known small-town mayor as Finance Minister in December. The decision was universally disliked and Zuma was forced to employ a new Finance Minister within a week.
Domestic data has also fuelled the Rand’s steep depreciation. February’s Standard Bank PMI dropped from 49.6 to 49.1, showing that contraction deepened. Standard Bank Group Ltd., Africa’s largest lender by assets, said that South Africa’s weak economic outlook will damage the bank’s returns on equity.
World Bank recently cut SA’s growth forecast for 2016 to just 0.8%, stating that South Africa’s growth slowed last year and the country is ‘flirting with stagnation, if not recession’ in 2016.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate dropped to a low of 21.8140 today.
Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast: Political Uncertainty to Dominate Trade
For both the UK and South Africa, political uncertainty will likely be the principle driving force behind GBP/ZAR exchange rate movement.
The UK’s well publicised EU referendum will bring a long period of political uncertainty, with the true impact of a ‘Brexit’ relatively unknown. The British asset will likely see significant price swings in response to opinion polls and speeches from prominent UK officials.
In South Africa, uncertainty as to the President’s competence will likely have a long-term detrimental impact on demand for the Rand. What’s more, the ongoing corruption case against Zuma is seriously damaging his credibility.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate climbed to a high of 22.2270 during Thursday’s European session.
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