GBP/ZAR Exchange Rate Sinks as Outlook for South African Economy Improves
The Pound to South African Rand exchange rate fell by -0.7% today. The pairing currently fluctuating around R20.41.
The South African Rand rose following today’s publication of November’s South African Manufacturing Production Index, which beat forecasts and rose by 1.8%.
Mfuneko Toyana, an analyst writing for Reuters, commented:
‘South Africa’s manufacturing output expanded 1.8% year on year in December after falling by a revised 4.1% in November.
‘Factory production was down 0.1% in December month on month and rose 5.2% in the three months to end-December.’
As a result, confidence has returned to South Africa’s economy, with manufacturing production beating odds and rising in the final quarter of last year.
Also, demand for the risk-sensitive South African currency has risen on growing hopes for the global economy.
Now that more and more countries are rollout out Covid-19 vaccinations, investors are becoming more optimistic about the outlook for the global economy.
Consequently, this is driving demand for riskier assets like the South African Rand.
Pound (GBP) Struggles as UK House Prices Struggle in January as Lockdowns Limit Buyers
The Pound struggled against the South African Rand today after the latest UK RICS Housing Price Balance for January fell below forecasts at 50%.
Simon Rubinsohn, an analyst at RICS, commented:
‘[D]espite attempts to keep the housing market open through the latest lockdown, there has been perhaps an inevitable impact on the level of activity in the sector.’
‘The latest RICS survey suggests that despite attempts to keep the housing market open through the latest lockdown, there has been perhaps an inevitable impact on the level of activity in the sector with both inquiries from potential buyers and new instructions slipping back.’
Other than that, the UK economic data calendar is quiet today, with markets instead focusing on the nation’s Covid-19 situation and vaccination rollout programme.
Health Secretary Matt Hancock has remained quiet about booking holidays aboard or in the UK.
As a result, GBP investors are remaining cautious as the outlook for the nation’s economy remains largely uncertain.
So far, 19.5% of the UK population have received at least one dose of the Covid-19 vaccine, while daily cases of the virus have fallen by -6,189 compared to the previous week.
Outlook: Could UK Economic Growth in the Fourth Quarter Boost Sterling Tomorrow?
Pound traders will be looking ahead to tomorrow’s release of the flash UK GDP data for the fourth quarter. Any improvement in the economy in the final quarter of last year would be GBP-positive.
Tomorrow will also see the release of the latest industrial and manufacturing production data. If this points to an improvement in the UK economy, then Sterling would rise.
Meanwhile, the South African Rand will continue to be driven by global risk sentiment. As a result, the ZAR/GBP exchange rate could edge higher if the outlook for the global economy improves as Covid-19 vaccinations intensify worldwide.
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