Pound to South African Rand Exchange Rate Investors Anticipate SA Data as Sterling Takes Backseat

Update: Lack of Surprises in UK Spring Statement Leaves Pound to South African Rand Exchange Rate Steady

As investors continued to digest the UK Spring Statement on Tuesday afternoon, the news ultimately had little impact on the Pound to South African Rand (GBP/ZAR) exchange rate.

The UK Office for Budget Responsibility (OBR), an independent economic group, indicated that little had changed in the UK economic outlook since the last budget.

As a result of the lack of changes, investors had little reason to move on the Pound. GBP/ZAR fluctuated within a tight range near the week’s best levels on Tuesday afternoon.

With Britain’s economic calendar looking quiet until next week, investors are now anticipating South African mining and business confidence data due on Thursday.

Pound to South African Rand Exchange Rate Continues to Climb on Tuesday amid Disappointing South African Data

Despite market uncertainty about the Brexit process and UK fiscal policy, the Pound to South African Rand (GBP/ZAR) exchange rate continued to edge higher on Tuesday following the publication of some disappointing South African data.

Higher market demand for risk-sentiment pushed GBP/ZAR slightly lower last week, from the interbank level of 16.44 to 16.35. So far this week the pair has recovered most of last week’s losses.

GBP/ZAR’s recovery has been largely due to South African Rand (ZAR) weakness. The currency saw additional pressure on Tuesday as South African manufacturing unexpectedly contracted in January.

South African manufacturing production was forecast to have slowed from 1.1% to 0.2%, but instead slumped with a contraction of -1.6%.

While South Africa’s year-on-year manufacturing results improved to 2.5% as expected, the previous figure was revised lower from 2% to 1.8%. Overall, investors had little reason to buy the Rand.

Pound (GBP) Exchange Rates Mixed as Investors Digest Spring Statement

Tuesday saw the UK Treasury hold its 2018 Spring Statement – an abridged sort of Budget presentation.

UK Chancellor Philip Hammond attempted to take an optimistic tone on the UK economic outlook during the Statement, despite the ongoing uncertainties of the Brexit process.

Some investors found the Pound (GBP) more appealing following Hammond’s forecasts that there will be a current account surplus in the coming year, as well as his indication that public spending could increase in 2018’s Autumn Budget.

However, the latest Office for Budget Responsibility (OBR) growth forecasts continue to show that UK growth will be among the weakest in the G20 in coming years.

2018 growth is forecast to be a slightly better-than-expected 1.5%, but this is expected to slow to 1.3% for 2019 and 2020.

Hammond also attempted to reassure about the UK government’s Brexit process, stating that significant progress had been made in talks.

South African Rand (ZAR) Exchange Rates Pressured by Risk-Off Movement

Last week, news of thawing diplomatic tensions between North Korea and South Korea as well as the US made risky emerging market currencies like the South African Rand more appealing.

However, this week there have been more things keeping pressure on risk-sentiment and making riskier currencies unappealing again.

News that Donald Trump will go ahead with trade tariffs on US imports of steel and aluminium has made markets anxious.

On top of this, news of a cronyism scandal potentially engulfing the government of Japan’s Prime Minister Shinzo Abe has left investors even more hesitant to buy risky currencies.

Pound to South African Rand Forecast: Thursday Data and Risk-Sentiment in Focus

For the remainder of this week, the Pound to South African Rand (GBP/ZAR) exchange rate is likely to be driven by risk-sentiment and South African Rand strength more than any notable change in the Pound outlook.

A lack of influential UK ecostats due for publication until next week’s inflation stats will leave Pound traders anticipating that and expected Brexit developments at next week’s EU summit.

The UK government still expects it will be able to agree to a post-Brexit transition period with the EU during the EU summit on the 22nd to the 24th. Until then, uncertainty is likely to keep Sterling relatively range-bound.

Instead, GBP/ZAR movement is more likely to be driven by South African Rand trade.

South African data due on Thursday could influence the currency, especially South African business confidence results from Q1 2018.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard