Domestic worries have kept South African Rand exchange rates under pressure, with political tensions still rising ahead of the African National Congress’ December leadership contest.
The internal politics of the ruling ANC remain a key headwind for the Rand, particularly as the threat of fresh ratings downgrades hang over the domestic economy.
Unless there are signs of the party moving away from the influence of incumbent President Jacob Zuma the appeal of the emerging-market currency looks set to remain limited at best.
A stronger US Dollar also diminished the appeal of the Rand this week, as investors continue to bet on the prospect of an imminent Federal Reserve interest rate hike.
Softening UK Sales Fail to Weigh Down GBP ZAR Rate
The mood towards the Pound, meanwhile, improved in spite of an unexpected contraction in the latest British Retail Consortium (BRC) like-for-like sales figure.
While the retail sector showed a significantly loss of momentum in October the GBP ZAR exchange rate held onto a stronger footing, in part thanks to positive UK housing market data.
Markets remain hopeful that the economy will continue to shake off the negative impact of Brexit-based uncertainty in the fourth quarter, limiting the downside potential of Sterling.
Even so, the Pound remains vulnerable to pressure if the latest round of Brexit negotiations fails to show progress towards at least some form of agreement between the UK and EU.
If signs point towards the second phase of talks getting the green light before the end of the year this could boost the GBP ZAR exchange rate further.
Rand Exchange Rate Forecast to Rally on Stronger SA Production Figures
Some measure of support could be in store for South African Rand exchange rates if Thursday’s raft of production data proves encouraging.
If mining and manufacturing output are both found to have maintained a solid rate of growth on the year this could prompt investors to pile back into the Rand.
However, any fresh signs of weakness within the South African economy would be received poorly, given the credit agencies further cause to consider a ratings downgrade.
As markets are not overly confident in the outlook of the domestic economy, or the actions outlined in the latest government budget, the impact of weaker data is likely to be significant.
Weaker GDP Growth Could Dent Pound Sterling
Further volatility is likely in store for the GBP ZAR exchange rate ahead of the weekend with the release of a number of UK ecostats.
Particular focus will fall on the NIESR gross domestic product estimate for the three months to October, which may point towards a continued ga
Any softening of growth could give the Bank of England (BoE) incentive to leave interest rates on hold for longer, diminishing the prospect of any further rate hikes for the foreseeable future.
Even so, a narrowing of September’s visible trade balance could help to boost the Pound higher against the Rand in the near term.
ZAR Data Released This Week
9th November 09:30 SA Mining Production (YoY) (SEP)
9th November 11:00 SA Manufacturing Production (YoY) (SEP)
10th November 09:30 UK Manufacturing Production (YoY) (SEP)
10th November 09:30 UK Visible Trade Balance (SEP)
10th November 13:00 UK NIESR Gross Domestic Product Estimate (OCT)