South African Rand (ZAR) Exchange Rates Bludgeoned as GDP Disappoints and Political Tensions Swirl
The South African Rand (ZAR) has seen its losses accelerated this morning following the release of the latest domestic GDP reading. Currently, the GBP/ZAR exchange rate is up over 2.3% on the day.
This GDP print saw growth come up well below expectations, with GDP contracting by 0.7% in the second quarter, rather than expanding by the 0.6% forecast by economists.
With South African GDP having also contracted in the first quarter, this sees the country enter a technical recession, something which is likely to escalate fears about the country’s economic stability.
GBP/ZAR Exchange Rate Soars on Brexit Optimism
The Pound South African Rand (GBP/ZAR) exchange rate surged higher last week, striking close to a two-year high.
This came largely as a result of Sterling sentiment being bolstered by comments from EU Chief Negotiator Michel Barnier on Wednesday which suggested the EU could be warming to the UK’s Brexit plan.
Meanwhile the Rand was met by another heavy sell-off last week, with markets shunning the emerging market currency amid ongoing trade uncertainty as well as concerns about a crash in the Argentine Peso.
Pound Sterling (GBP) Exchange Rate Gains Trimmed by Underwhelming UK Construction Growth
At the same time the Pound (GBP) advance has been slowed somewhat this morning as the UK’s construction sector expanded at a slower pace than expected last month.
According to data published by IHS Markit, the UK’s construction PMI slipped from 55.8 to a three-month low of 52.9 in August, falling well below the more modest slide to 55 that analysts had initially forecast.
The disappointing result appeared to be driven by a notable slowdown in civil engineering amid a lull in new infrastructure projects as well a fall in house building after a surge in July.
However it wasn’t all doom and gloom, with firms continuing to expand their workforces in anticipation of future demand.
Tim Moore, Associate Director at IHS Markit, said:
‘There are some encouraging takeaways from the latest survey, especially the resilient degree of new business growth in August and a strong upturn in staff recruitment.
‘Survey respondents noted that they are confident about achieving organic growth at their businesses in the coming 12 months.’
GBP/ZAR Exchange Rate Forecast: Carney’s Treasury Appearance in Focus
Looking ahead, the Pound South African Rand (GBP/ZAR) exchange rate may be subject to further volatility this afternoon as Bank of England (BoE) Governor, Mark Carney appears before the UK’s Treasury committee.
Carney is expected to face questions regarding the bank’s decision to raise interest rates last month as well on the current pace of inflation, with an upbeat assessment from the Governor likely to lend some further strength to the Pound (GBP).
However, potentially having an even greater impact on Sterling sentiment, will be whether Carney is probed about his future at the BoE, amidst ongoing speculation that he may be asked to stay on past June 2019 and help guide policy through the UK’s Brexit transition.
Meanwhile the South African Rand (ZAR) may come under increasing pressure in the second half of this week should market risk aversion continue to build in the face of ongoing trade uncertainty between the US and China.