Update: Stagnation of UK Housing Market Weighs Heavily on Pound South African Rand Exchange Rate
A surprise stagnation in the RICS house price balance for February put further pressure on the Pound to South African Rand (GBP/ZAR) exchange rate, undermining confidence in the domestic outlook.
With the UK housing market struggling to find support in the midst of ongoing Brexit uncertainty the appeal of the Pound remains naturally limited.
However, as forecasts point towards a narrowing of January’s UK visible trade deficit this could offer the Pound some degree of support ahead of the weekend.
Any indications that the UK economy is holding up should give the GBP/ZAR exchange rate the opportunity to push higher.
Pound South African Rand (GBP/ZAR) Exchange Rate Shrugs Off Better-than-Forecast South African GDP
Better-than-expected fourth quarter South African gross domestic product (GDP) figures saw the Pound to South African Rand (GBP/ZAR) exchange rate come under renewed pressure this week.
Investors were encouraged to see signs that the South African economy is starting to pick up, especially now that former president Jacob Zuma has left office.
However, the South African Rand (ZAR) struggled to hold onto this bullish momentum for long thanks to concerns surrounding the current US approach to trade.
With the Trump administration looking set to push ahead with steep tariffs on steel and aluminium there are significant fears within markets over the possibility of a trade war.
This has limited the appeal of risk-sensitive currencies such as the Rand, offering the GBP/ZAR exchange rate room to rally.
Lack of Brexit Progress Weighs Heavily on Pound Exchange Rates
Even so, the GBP/ZAR exchange rate remains vulnerable to Brexit-based jitters, with the EU’s draft proposals having failed to encourage investors.
As the UK and EU are still at odds on the subject of their potential future trading relationship an air of uncertainty has continued to limit the appeal of the Pound (GBP).
With little over a year left until the exit deadline of March 2019 there are significant concerns that an agreement does not appear to be on the cards any time soon.
This is likely to weigh on UK economic outlook, potentially denting the first quarter gross domestic product.
If Friday’s NIESR GDP estimate for the three months to February points towards a dip in growth, as forecast, GBP exchange rates are likely to slump once again.
Any signs that the UK economy is losing momentum would give the Bank of England (BoE) pause when considering tighter monetary policy, diminishing the prospect of an imminent interest rate hike.
Trade War Fears and Strong US Jobs Data Forecast to Dent South African Rand
The wider sense of market risk appetite could provoke additional volatility for the GBP/ZAR exchange rate ahead of the weekend.
Demand for the Rand could slump sharply if the US administration chooses to press ahead with its protectionist rhetoric, with the global economy set to suffer in the event of a trade war.
ZAR exchange rates may see further weakness on the back of the latest raft of US labour market data, as the unemployment rate is forecast to fall from 4.1% to 4.0%.
Fresh signs of tightness within the US labour market would fuel bets that the Federal Reserve remains on course to raise interest rates up to four times over the course of the year, putting further pressure on the Rand.
Domestic concerns may also limit the appeal of the Rand over the coming days, with markets still somewhat sceptical over the African National Congress’s (ANC) plans to accelerate efforts to expropriate land.