The Pound to South African Rand exchange rate continued edging away from recent lows on Tuesday as the Rand’s strength was limited by economic concerns.
Pound (GBP) Fluctuates on Post-Brexit Trade Speculation
The Pound spiralled lower last week amid disappointing UK data and concerns that Brexit negotiations aren’t going as smoothly as hoped, with GBP/ZAR slumping to its lowest levels of July so far.
Last week saw the publication of Britain’s June inflation results, which were lower than expected and dampened speculation that the Bank of England (BoE) could adjust monetary policy in the near future.
UK Trade Minister Liam Fox also spooked investors when he indicated that Britain would cope if it failed to secure a post-Brexit UK-EU trade deal.
Sterling demand has improved slightly this week however. Despite a lack of fresh ecostats, speculation about a potential UK-US trade deal has lent the Pound support.
Liam Fox met with Trump administration officials this week to discuss a post-Brexit UK-US trade deal.
While a trade deal cannot be signed off before the UK’s official exit from the EU, UK and US officials remain confident that a workable accord will be reached.
South African Rand (ZAR) Movement Limited on Economic Concerns
The South African Rand has been putting on a mixed performance since the South African Reserve Bank (SARB) unexpectedly cut SA interest rates last week.
The surprising move was well received by some sectors, but the Rand’s response was fairly reserved.
Demand for the Rand has also been limited by fresh concerns about South Africa’s overall economic outlook.
South African Reserve Bank Governor Lesetja Kganyago has warned that South Africa’s economy faces significant headwinds, and credit rating agencies (like Fitch) have criticised the SA government’s new economic growth proposals.
GBP/ZAR Forecast: UK Growth Stats and Fed Meeting Ahead
Wednesday is likely to be a key session for the Pound to South African Rand exchange rate, as it will see the publication of this week’s most influential UK data.
Britain’s Q2 Gross Domestic Product (GDP) projection will be published and a better-than-expected result would support speculation that UK economic activity has been more resilient than expected. This would boost the Pound.
Conversely, an on or below forecast result is liable to weigh on the Pound.
Global factors are also likely to influence the Pound to Rand exchange rate on Wednesday as the Federal Reserve will deliver its July monetary policy decision.
If the Fed indicates that its stimulus tightening plans have been set back by weaker-than-expected US inflation, demand for emerging-market currencies like the Rand could rise.
On the other hand, bolstered 2017 Fed rate hike bets would be negative for higher-risk currencies and may pressure ZAR lower.