GBP/ZAR Exchange Rate Rally Cut Short Today by Disappointing UK GDP Reading

Revision to Q4 Growth Stalls Pound South African Rand Exchange Rate Recovery

The Pound South African Rand (GBP/ZAR) exchange rate is on the back foot again this morning, following the release of the UK’s latest GDP estimate.

At the time of writing the GBP/ZAR exchange rate is trending in a narrow range after relinquishing gains of around 0.2% following the release of the UK’s GDP figures.

Pound Sterling Slides as GDP Revised Down

The Pound (GBP) was brought crashing back down to earth this morning, with its attempts to rally against the South African Rand (ZAR), cut short by the release of the UK’s latest growth figures.

According to data published by the Office for National Statistics (ONS), the latest estimate of the UK’s fourth quarter GDP saw growth at just 0.4%.

This prompted the GBP/ZAR exchange rate to slide as it was revised down from an earlier reading which suggested that growth was a slightly more robust 0.5%.

The unexpected dip at the end of the year also saw annual growth strike just 1.4% in 2017, missing forecasts of 1.5% and weighing on the Pound exchange rate this morning.

With business investment also shown to have stalled in the fourth quarter, many GBP investors have begun expressing doubts that the Bank of England (BoE) will hike rates in the near future.

The BoE previously indicated that the pace of monetary tightening could accelerate if the UK economy remained on its current track.

South African Rand (ZAR) Buoyed by Budget Reaction

Meanwhile the South African Rand (ZAR) remains buoyant this morning following a positive market reaction to the latest South African budget.

Investors welcomed the proposals from Finance Minister Malusi Gigaba, as he attempts to cut the national deficit through raising VAT and slashing spending over the next three years.

While a number of observers expressed concerns over how this may impact the poorest in the country the Treasury believes that this would be ‘less harmful to growth than raising other taxes.’

Most importantly however is the fact that markets believe the budget will help South Africa avoid having its credit rating downgraded; a prospect that has hung over the Rand for months.

GBP/ZAR Forecast: Brexit Back in Focus as May Holds Talks

Looking ahead the GBP/ZAR exchange rate may find itself being driven by Brexit sentiment again in the coming days as the UK government holds talks to hammer out exactly what it wants from Brexit.

Theresa May is set to meet with senior members of her government in an attempt to make concrete plans on its approach to Brexit.

There has been considerable infighting at the top of the Conservative party in recent months as many members seem at odds over how closely aligned the UK should be to the EU post-Brexit.

However it will be a difficult balancing act for the PM as she must also find an approach that will also be accepted by the EU, with movement in GBP likely to be tied to how well the proposals are received.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail