GBP/ZAR Exchange Rate Drops as South African Economy Buoyed by Positive Growth
The Pound South African Rand (GBP/ZAR) exchange rate is down by 0.8% today and is currently trading around R18.5819.
The South African Rand (ZAR) gained following the publication of South Africa’s GDP figures for the fourth-quarter, which showed an uptick of 1.4% – although falling below the consensus of 1.6%.
Joe de Beer, a Deputy Director-General at Stats SA, commented:
‘The positive growth in the fourth quarter follows after the positive (growth) we had after the recession in the first half of the year.’
Sterling (GBP), meanwhile, plummeted against the South African Rand (ZAR) following comments from Labour’s shadow chancellor, John McDonnel, who said that few Labour MPs would back Prime Minister Theresa May’s Brexit deal on 12 March.
‘We’re trying to ensure our members don’t have to vote for Theresa May’s deal… There doesn’t necessarily have to be a reference to Theresa May’s deal.’
This has considerably weakened the Pound on fears that on-going divisions in Parliament could likely see May’s deal being rejected on 12 March, which would extend further Brexit uncertainty and hinder developments between the UK and the EU.
GBP/ZAR Exchange Rate Falls despite Positive UK Services PMI Figures
Today saw the publication of the UK Markit Services PMI figures for February, which increased above expectation to 51.3, avoiding the consensus of a contraction.
However, many analysts interpreted these figures gloomily, with Chris Williamson, Chief Business Economist at IHS Markit, saying:
‘The latest PMI surveys indicate that the UK economy remained close to stagnation in February, despite a flurry of activity in many sectors ahead of the UK’s scheduled departure from the EU.’
Today also saw the printing of the UK BRC like-for-like retail sales figures for February, which fell below consensus by -0.1%.
Many GBP traders, however, will be awaiting the speech by the Governor of the Bank of England, Mark Carney, and with any bullish comments following on from last week’s Brexit optimism, we could see the Sterling begin to rise.
South African Rand Pound (ZAR/GBP) Exchange Rate Soars despite Weak Chinese Figures
The South African economy is closely tied to China, which is one of its largest trading partners, and with today’s weak Chinese Services PMI figures for February, this has proved a bit of a drag on ZAR.
There was also an announcement from China saying that it would slash its growth forecast for 2019.
Li Keqiang, China’s Premier, commented:
‘What we faced was profound change in our external environment… especially the China-US economic and trade frictions, [which] had an adverse effect on the production and business operations of some companies and on market expectations.’
With the encouraging growth figures buoying optimism in the South African economy, this news has generally gone unnoticed, leaving the ZAR/GBP exchange rate soaring instead.
GBP/ZAR Outlook: Brexit Developments Remain in Spotlight
ZAR traders will be looking ahead to the printing of the South African Business Confidence Index for February tomorrow, and with any signs of an increase this could buoy the South African Dollar further.
There are no significant UK data releases tomorrow, however, there will be a speech by the Bank of England’s Sir Jon Cunliffe, the Deputy Governor for Financial Stability, and if we see any dovish comments about the state of the UK economy, this could further send the Pound falling.
The GBP/ZAR exchange rate, however, is more likely to be dictated by Brexit developments this week, and any further signs that May’s deal will be rejected by Parliament, the Sterling could further fall against the South African Rand.