South African Rand (ZAR) Exchange Rates Gains Curtailed as Markets Unimpressed by Ramaphosa’s Stimulus Package
Despite last week’s strong performance, the South African Rand (ZAR) has fallen across the board this morning due to a combination of emerging market jitters and President Cyril Ramaphosa’s ‘disappointing’ economic stimulus package.
With South Africa’s economy falling into a recession this year, markets were putting a lot of faith in Ramaphosa to deliver a stimulus package that would help spur job creation and growth.
However, analysts have been left disappointed by the measures, which will see a reallocation of budget rather than an injection of public money.
Analysts also appeared sceptical that Ramaphosa’s infrastructure spending – which is designed to attract external investment, similar to India in 2015 – will have the desired effect, with some even fearing that he may not have the political capital required to push through his stimulus package.
GBP/ZAR Exchange Rate Plummets on Escalating Brexit Fears
The Pound South African Rand (GBP/ZAR) exchange rate was hit by heavy losses last week, with the pairing plummeting from close to a two-year high as Sterling sentiment was battered by fears of a no-deal Brexit.
This came in the wake of an EU summit which saw EU leaders unanimously reject Theresa May’s Chequers plans, with May later confirming that talks were at an impasse in a defiant statement in which she stoked fears of a no-deal Brexit by asserting that ‘no deal is better than a bad deal.’
Meanwhile some positive domestic data and the South African Reserve Bank’s (SARB) latest rate decision helped to turbo charge the Rand last week.
The most notable gains came on Wednesday as domestic inflation unexpectedly cooled from 5.1% to 4.9% in August, which in turn helped prompt a more hawkish outlook from the SARB following its meeting on Thursday, resulting in further gains in ZAR exchange rates.
GBP/ZAR Exchange Rate Forecast: Slowing UK Retail Activity to Dent Sterling?
Looking ahead to the remainder of the week, the Pound South African Rand (GBP/ZAR) exchange rate could come under pressure on Wednesday following the release of the Confederation of British Industry’s (CBI) latest distributive trades index.
Economists forecast September’s survey of British retailers will result in firms reporting that activity in the sector was down this month, likely dragging on Sterling sentiment.
Further downside risks to GBP may also come in the form of ongoing Brexit uncertainty, with the Pound likely to tumble if headlines continue to focus on the lack of progress in negotiations.
Meanwhile ZAR investors are likely to be focused on South Africa’s upcoming trade figures, with the Rand potentially jumping if SA records a decent trade surplus in August as forecast.