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Pound South African Rand Exchange Rate Falls as South African Manufacturing Production Beats Forecasts

South African Rand Currency Forecast

GBP/ZAR Exchange Rate Sinks as South African Economic Outlook Steadily Improves

The Pound South African Rand (GBP/ZAR) exchange rate fell by -0.2% today. ZAR benefiting following the release of the latest South African manufacturing production index for March, which beat forecasts and rose by 4.6%. The pairing is trading around R19.78 at the time of writing.

As a result, the South African Rand has benefited from an improved outlook for the nation’s economy, with manufacturing showing signs of recovery from the Covid-19 pandemic.

Steel and Engineering Industries Federation of Southern Africa (Seifsa) chief economist, Chifipa Mhango, commented on the data:

‘When you look at these figures in conjunction with recently released capacity utilisation data of 74% in the manufacturing sector for the first quarter of 2021, it can be surmised that there is more room for increased activity and, hence, production.’

However, following the emergence of the South African Covid-19 variant, ZAR investors are remaining somewhat cautious about the nation’s economic outlook in the months ahead.

Pound (GBP) Exchange Rate Dips Despite Growing Confidence in the UK Economy

The Pound (GBP) fell today despite Prime Minister Boris Johnson’s comments that England’s lockdown ‘roadmap’ was still on track for easing lockdown on 17 May.

Boris Johnson said in a public address:

‘I want to thank you particularly because your efforts have so visibly paid off, giving us the time to vaccinate more than two thirds of all adults across the UK, with more than one third – nearly 18 million people – also receiving their second dose and thereby unquestionably saving many lives.’

As a result, GBP investors have become more optimistic about the outlook for the UK economy, which is expected to further recovery once lockdown measures are eased further in May and June.

However, in the absence of any notable UK economic data today, the GBP/ZAR exchange rate has begun to shed some of its gains.

The latest UK BRC like-for-like retail sales report for April, which beat forecasts and rose by 39.6%, also failed to buoy the Pound today.

Helen Dickinson, the BRC’s chief executive, commented on the figure:

‘With the short-term pent-up demand for the shopping experience drawing consumers back to stores, non-food sales across stores. It is great to see customers feeling confident visiting shops, a testament to the ongoing investment by retailers in making their stores, warehouses, and deliveries Covid-secure.

‘However, this sales growth is fragile. There is little competition for share of spending while parts of hospitality, leisure, and tourism remain restricted and inner cities and town centres continue to perform poorly as many people continue to work from home.’

GBP/ZAR Exchange Rate Forecast: Could a Strong UK GDP Boost Sterling?

Pound traders will be awaiting tomorrow’s release of the preliminary GDP data for the first quarter. If this points to a steady recovery in the British economy, then the GBP/ZAR exchange rate could begin to head higher.

Tomorrow will also see the Bank of England’s (BoE) Andrew Bailey deliver a speech. If he is notably upbeat about the outlook for the UK economy, then the GBP/ZAR exchange rate would head higher.

However, risk sentiment will continue to influence the risk-sensitive South African Rand this week. So, any signs of souring risk sentiment – or Covid-19 related concerns – would prove ZAR-negative.