GBP/ZAR Exchange Rate Falls as SA Economic Growth Improves
The Pound South African Rand (GBP/ZAR) exchange rate plummeted by -1.30% today, after the South African growth figure for the second quarter soared from -3.1% to 3.1%. The year-on-year growth figure also exceeded forecasts, rising from 0% to 0.9%.
South African Rand traders have been buoyed today, as the SA economy has avoided recession a second recession in two years, as growth came in far stronger than expected.
Today’s growth figures were bolstered by South Africa’s rebound in its mining sector, which grew by 14.4% in its second quarter, thanks to the end of ongoing gold mine strikes and a rally in metal prices.
Kevin Lings, the Chief Economist at Stanlib Investment, commented:
‘The growth was off a very low base, but at least better news about performance of the economy. Importantly SA has avoided sliding back into recession. Growth boosted by mining, finance, trade.’
Meanwhile, US-China trade tensions are remaining in focus for many South African Rand traders.
With China being South Africa’s closest trading partner, SA markets are becoming increasingly jittery as the US and China struggle to come to a consensus, and failing to schedule trade talks while ramping up tariffs.
Ipek Ozkardeskaya, a Senior Market Analyst at London Capital Group, said:
‘The investor mood was spoiled by the US and Chinese officials’ inability to fix a date for the next face-to-face meeting that is supposed to take place in September. There is a rising fear that the meeting will be postponed or cancelled following the latest escalation of tensions.’
GBP/ZAR Exchange Rate Sinks ahead of Parliamentary Brexit Showdown
The Pound plummeted against the South African Rand today as the UK political situation remains in a state of alarming political fluidity.
Today will see a parliamentary showdown in which Conservative Rebel and Labour MPs will table legislation to prevent a no-deal Brexit on October 31.
Philip Hammond, the former UK Finance Minister, heightened concerns of a disorderly exit from the European Union, saying:
‘There is no progress. There are no substantive negotiations going on… I suspect the reason is that the UK government itself has concluded, as leaks have suggested, that there are no alternative arrangements that would be implementable on October 31 that would meet the EU’s red lines and therefore anything the UK government does propose is likely to be rejected as unacceptable.’
In economic news, the publication of the UK Markit PMI for August fell below forecast, sinking from 45.3 to 45, further exacerbating the UK’s economic woes.
Tim Moore, an Economists Associate Director at IHS Markit, said:
‘Domestic political uncertainty continued to hold back the UK construction sector in August, with survey respondents indicating that delays to spending decisions had contributed to the sharpest fall new work for over 10 years.’
GBP/ZAR Outlook: Sterling Could Rise if a No-Deal Brexit is Successfully Challenged
Sterling traders will be looking ahead to tomorrow’s release of August’s Markit Services PMI. As this is expected to ease, we could see the Pound continue to fall on rising economic concerns.
Meanwhile, South African Rand traders will be keeping a close eye on global economic developments. Any signs of improvement in US-China trade relations could bolster market confidence in the risk-averse ZAR.
The GBP/ZAR exchange rate could improve, however, if MPs successfully challenge the Conservative Government in parliament today, as this would improve the chances of preventing a no-deal Brexit in October.