Pound South African Rand (GBP/ZAR) Exchange Rate Recovers After Rise in BoE Rate Cut Odds
As the impact of Thursday’s Bank of England (BoE) policy announcement faded the Pound Sterling to South African Rand (GBP/ZAR) exchange rate delivered a strong rally.
With the higher odds of the BoE cutting interest rates back to 0.5% in 2020 effectively priced into Pound Sterling (GBP) the potential for further losses eased ahead of the weekend.
Market risk appetite generally diminished, meanwhile, in the face of October’s Chinese trade data.
Although export volumes showed a smaller contraction on the year than forecast the figures still pointed towards a fresh loss of momentum for the Chinese economy.
As hopes of an imminent breakthrough in US-China trade discussions also faded this left the risk-sensitive South African Rand (ZAR) on the back foot.
Given that the South African economy has already shown signs of struggling the prospect of a sustained global slowdown weighed heavily on ZAR exchange rates.
Resilient UK Gross Domestic Product Forecast to Shore up GBP Exchange Rates
Support for the Pound could pick up further on Monday as investors hope to see an improvement in the latest set of UK gross domestic product data.
With the quarterly growth rate forecast to rebound from -0.2% to 0.3% in the third quarter confidence in the economic outlook could pick up sharply.
As long as the UK economy avoids slipping into a technical recession, delivering a positive quarter of growth, the downside potential of GBP exchange rates is likely to prove limited.
Even though growth is unlikely to return to its long-running average, given the ongoing impact of Brexit-based uncertainty, a solid showing here could offer the Pound a strong boost against its rivals.
On the other hand, forecasts point towards a rather less encouraging monthly GDP reading from September.
If the economy appears on track to shed further momentum before the end of the year this may limit the potential for GBP/ZAR exchange rate gains.
Retail Sales Rebound May Offer South African Rand (ZAR) Boost
The South African Rand may struggle to find support in the near future unless the US and China reach a formal phase one trade agreement.
However, the mood of ZAR exchange rates could improve if September’s South African retail sales show an improvement.
After the -0.9% monthly drop seen in August investors are hoping for evidence of renewed consumer confidence.
As long as consumer spending shows signs of picking up this should help to limit the selling pressure on the Rand, in spite of worries over the health of the wider economic picture.
Another month of retail weakness could exacerbate existing concerns surrounding the strength of the South African economic outlook.
Unless September’s mining and gold production figures can also deliver a solid rebound the South African Rand is likely to fall further out of favour with investors.