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Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Slumps 1.3% on BoE Warning of ‘Disorderly Brexit’

GBP/ZAR Exchange Rate Slumps Following Positive South African Data

The GBP/ZAR exchange rate slumped over the course of this morning and is currently trading at interbank rates of R17.42.

The South African Reserve Bank published its latest private sector credit figures for October, which showed there had been a decrease from 6.26% to 5.82%, despite predicted growth to 6.41%.

In addition to this, figures released later in the morning revealed the producer price index for October showed a higher-than-expected climb, from 0.5% to 1.4% despite the predicted growth only being 0.6%.

The producer price index figures for October when compared to last October have shown an increase from 6.2% to 6.9% despite a forecast of 6.3% which helped ZAR rally against the Pound.

GBP/ZAR Exchange Rate Slumps on Bleak UK Economic Forecast

In a speech yesterday, the Bank of England (BoE) Governor, Mark Carney warned that if there is a no-deal Brexit, the UK economy could face a contraction of 8% without a transition period.

The BoE also warned that the UK currency could nosedive by 25%, although Carney said he did not expect this to happen and was simply presenting the worst-case-scenario if there happens to be a ‘disorderly Brexit’.

This disorderly scenario he outlined could also see the house prices in the UK fall by 30%, unemployment rise to 7.5%, and commercial property prices slide by 48%.

ZAR Buoyed by Interest Rate Hike and US-China Trade Tensions Cooling

Last week saw the South African Rand rally as the South African Reserve Bank (SARB) raised interest rates from 6.5% to 6.75%, buoying ZAR.

With the US-China trade row continuing, ZAR continues to be a casualty, although the perceived cooling of tensions has allowed the currency to push back against the Pound, with US President Trump saying:

‘There is a good possibility that a deal can be made, and that he [Xi Jinping] is open to that [… although] certain conditions have to be met.’

GBP/ZAR Exchange Rate could Slump further if US-China Trade Tensions Cool

The GBP/ZAR exchange rate will likely see some movement as the process of getting the UK out of the EU draws closer.

Friday will also see the release of UK consumer confidence figures for November, and if the prediction that it is going to slide further comes true the Pound may continue to fall against the Rand.

The latest trade balance from the South African Revenue Service is set to be released tomorrow, and if the forecast that the figure is set to decrease from the previous figure of -2.95B to -2.25B, the Rand could potentially push back further against the Pound.

With the G20 Summit approaching, any signs that US-China trade tensions are cooling would likely offer the Rand support, allowing it to rally further against major currencies, including Sterling.