Pound South African Rand Exchange Rate News: GBP/ZAR Plummets as Ramaphosa Claims the Rand is ‘Undervalued’

GBP/ZAR Exchange Rate Weakens as Ramaphosa Comments Buoy Rand

The Pound South African Rand (GBP/ZAR) exchange rate initially got off to a fairly positive start last week, with Sterling advancing in the first half of the week as it was buoyed by Brexit optimism from both the UK’s Brexit secretary Dominic Raab and German Chancellor Angela Merkel.

However the second half of the week saw the GBP/ZAR exchange rate nosedive, with the trigger appearing to be comments from South African President Cyril Ramaphosa in which he claimed ‘the Rand is undervalued.’

These comments coincided with a broader upswing in emerging market sentiment last month, which has helped the Rand claw its way back up from a two-year low struck at the start of the month.

The GBP/ZAR exchange rate was then dealt one final blow at the end of the week’s session as the UK’s latest GDP figures saw Britain’s first quarter growth revised down to 0.1%.

South African Rand (ZAR) Exchange Rates Weakens in the Face of Bullish US Dollar (USD)

The South African Rand (ZAR) is weakening across the board this morning as a resurgent US Dollar (USD) sees investor risk appetite plummet.

This bullish jump in the US Dollar (USD) appears to be driven by a mix of rising US bond yields as well as lingering trade uncertainty, something which is also applying pressure to the Rand.

While markets were relieved by the announcement of the new USMCA trade agreement after months of back and forth between the US and Canada, they remain concerned that Trump’s trade dispute with China will not be so easily solved.

Pound (GBP) Gains Dented by Lacklustre Construction PMI

At the same time however the Pound (GBP) has found its gains trimmed this morning by the publication of the UK’s latest construction PMI.

Data published by IHS Markit revealed activity in the UK’s construction sector slowed faster-than-expected in September, with the index tumbling from 52.9 to 52.1, the weakest pace of growth since the disruption from the ‘Beast from the East’ weather system caused growth to contract in March.

Once again Brexit uncertainty proved to be a key drag on activity, with clients reluctant to commit before the UK finalises a deal with the EU.

GBP/ZAR Exchange Rate Forecast: Slide in Services PMI to Weaken Sterling?

Looking to the rest of this week’s session, the Pound South African Rand (GBP/ZAR) exchange rate may be forced to cede some ground on Wednesday following the release of the UK’s Services PMI.

Economists currently forecast that September will have seen a slowdown in growth in the UK’s all-important service sector, with expectations that ongoing Brexit uncertainty will have continued to dampen sentiment amongst those firms surveyed.

Meanwhile there may be a considerable downside risk to the Rand this month in the form of a possible ratings downgrade from Moody’s. The threat of this may keep ZAR in check this week, especially as it appears to coincide with a broader weakening in risk appetite from markets.

 

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


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