Forecasts for Slower Growth after Brexit cause GBP/ZAR Exchange Rate Losses
The Pound has traded in a narrow range against the South African Rand today in the wake of a leaked document suggesting a UK economic slowdown after Brexit.
The worst conclusion of the leaked impact assessment on is that the UK economy will take a hit regardless of how it leaves the EU.
The document suggests that whether it’s single market access, not having a trade deal or having a comprehensive trade deal, there will still be a slowdown in the nation’s economy.
In greater detail, the report predicts 8% lower national income with no deal, 5% with a free trade agreement and 2% with single market access.
Responding to the document, the government said the report doesn’t predict the economic effects of securing a bespoke trade deal with the EU.
Commenting on the issues the report raises, the political campaign group Best for Britain Chief Executive Eloise Todd said:
‘The government are calling this document embarrassing but it’s more than that. It is a colossal act of economic self-harm, written down clearly, in black and white. We are reading about an economy facing the abyss.’
South African Rand to Pound Rate Rises on Zuma Rumour
The Rand has risen against the Pound and other peers today despite South Africa currently being gripped by a severe water shortages, particularly affecting Cape Town.
This appreciation comes on hopes over the rapid removal of Jacob Zuma, the longstanding and controversial South African President.
South Africa is currently ruled by the ANC Party, which recently underwent a leadership change and now has Cyril Ramaphosa as Party President.
Although Zuma remains in charge of the country, many hope he could be ousted in the coming months.
The Eastern Cape ANC leadership has recently commented on Zuma’s removal, with Secretary Lulama Ngcukaitobi stating:
‘The national officials must fast-track this process. There have been calls by South Africans for the necessity to change the state president, and this comes from a variety of structures. ANC officials must consider these views from these sectors and respond accordingly’.
Much of South Africa’s economic malaise has been blamed on Zuma’s influence, in particular the country’s credit ratings downgrade, and it is hoped that his removal will herald a change in economic fortunes.
GBP/ZAR Expected to Rise on UK PMI Figures
This week, Pound/Rand exchange rate movement may be caused by the UK GfK consumer confidence reading on Wednesday, as well as manufacturing and construction PMIs on Thursday and Friday.
Expectations are for a negative confidence reading but rising PMI activity, so the Pound could ultimately appreciate against the Rand if forecasts are accurate.
The week’s principal South African data will be Wednesday’s trade balance reading for December, which is tipped to show a surplus reduction from 13bn to 10bn.
Trade stats are usually subject to volatility, so if the reading falls by more than expected then the Rand could slide against the Pound.