Pound South African Rand (GBP/ZAR) Exchange Rate Slides despite Surprise Rise in UK GDP
The Pound Sterling South African Rand (GBP/ZAR) exchange rate fell over Wednesday morning, and the pairing is currently trading at an inter-bank rate of R18.2850.
The UK economy expanded in February despite forecasts predicting GDP would remain stagnant.
February’s GDP rose by 0.2%, and over the last quarter the economy expanded by 0.3%.
On an annual basis, in the quarter leading to February GDP rose by 2%, the highest rate of growth since late 2017.
Commenting on the data, Chief Economist at Deloitte, Ian Stewart said:
‘The UK is proving more resilient than expected in the face of a global slowdown and Brexit headwinds. The pace of growth could be choppy, but the UK is likely to grow at about the same pace as the Euro area for this year.’
Pound (GBP) Falls despite UK Manufacturing at Highest Level in Over a Decade
The Pound (GBP) continued to fall against the South African Rand (ZAR) despite both manufacturing and industrial production rising higher than expected in February.
Manufacturing surged by 0.9% likely due to Brexit stockpiling, with nervous companies driving the growth.
Levels of manufacturing are now at its highest level since April 2008.
Commenting on the data, Seamus Nevin, Chief Economist at Make UK said:
‘While the positive performance of manufacturing will come as a relief after months of concern survey anecdotal evidence suggests that the results may, once again, be due to no-deal Brexit contingency planning, stockpiling and declining export demand for UK goods rather than a sign the economic fundamentals are sound.
‘This, along with the increasing global economic slowdown again reinforces why British businesses need certainty on what form of Brexit the country is headed for. Businesses are trying to standstill until the Brexit fog clears but in doing so they are actually going backwards.’
South African Rand (ZAR) Rises despite Deteriorating Business Confidence
The South African Rand (ZAR) rose against the Pound (GBP) despite South African business confidence falling to 91.8 from the previous 93.4.
This is the fourth consecutive month that confidence has fallen.
March’s business confidence slipped to its lowest level since August 2018 when the country suffered from the worst power cuts in more than a decade.
Last month South Africa suffered from 10 consecutive days of rolling blackouts as Eskom Holdings SOC Ltd. removed around 4,000 megawatts from the system each day for a week as unreliable, aging plants struggled to meet demand.
However, this could do little to stop the South African Rand from rising.
Pound South African Rand Outlook: Will the GBP/ZAR Exchange Rate Rise on Brexit Optimism?
On Wednesday evening, the Pound (GBP) may rise against the South African Rand (ZAR) following the emergency European Council summit.
If the EU grants the UK an extension to Article 50, which according to reports could be up to a year, the UK currency could rise on a fresh wave of Brexit optimism as a no-deal will likely be avoided.
Following the summit, Prime Minister Theresa May is expected to continue cross-party talks with the Labour party, which could also buoy Sterling on Brexit optimism.
If reports suggest that these discussions prove successful and the current Brexit deadlock in the House of Commons is resolved, the Pound South African Rand (GBP/ZAR) exchange rate could rally.