Pound South African Rand News: IMF’s Warning over Brexit Leaves GBP/ZAR Steady

Cautious Response to IMF Comments Leaves Pound to Rand Exchange Rate Stable

Pound Sterling (GBP) has held close to opening levels against the South African Rand (ZAR) today; this leaves the GBP/ZAR exchange rate near its best level since late September.

The latest news to influence the GBP/ZAR exchange rate has been a number of announcements from the International Monetary Fund about the UK economy.

IMF analysts have predicted that a bad Brexit deal could cause major damage in the UK and the Eurozone, with Chief Economist Maurice Obstfeld warning:

‘If there are arrangements which are more restrictive of trade [and] put up more barriers which disrupt supply chains, then this is going to be more challenging for both the UK and its Eurozone partners.’

Despite the warning, however, Mr Obstfeld has given a balanced outlook:

‘On Brexit, our baseline forecast … is that a deal will be reached.

‘It will be one in which trade in goods is essentially tariff‑free, which would allow most supply chains to remain intact.’

South African Rand to Pound (ZAR/GBP) Exchange Rate Steady as IMF Cuts Growth Forecasts

The IMF has also had a strong influence on South African Rand (ZAR) demand today, which has led to tight trading against Pound Sterling (GBP).

Providing similar pause for thought among Rand traders, IMF officials have cut their 2018 and 2019 growth forecasts and urged economic reform to aid a national recovery.

South African President Cyril Ramaphosa has failed to trigger an anticipated economic revitalisation and the IMF’s report shows that more work is urgently needed to keep the nation’s economy afloat.

GBP/ZAR Forecast: Risk of Pound Sterling Decline on UK GDP Slowdown

For the rest of the week, Pound Sterling/South African Rand exchange rate movement may be caused by Wednesday’s UK GDP and construction output data.

The GDP growth reading for August is tipped to show a slowdown compared to July; a forecast-matching shift from 0.3% to 0.1% might drain GBP trader confidence.

Among other issues, a slower pace of GDP growth risks causing a negative reading in the future, which may lead to a recession if it is prolonged.

Pound Sterling could be similarly weakened by Wednesday’s construction output reading for August, which is predicted to show a decline in year-on-year activity.

As with the GDP reading, a shift from 3.5% to 1.4% could unsettle GBP traders and cause early losses in the GBP/ZAR exchange rate.

The rest of the week’s news will come from South Africa, covering business confidence on Wednesday, production on Thursday and consumer confidence on Friday.

A higher business confidence reading could cause ZAR/GBP exchange rate gains, although any Rand support could fade if Thursday’s production figures decline as forecast.

The week may end with Pound to Rand exchange rate gains, as Friday’s South African consumer confidence reading is tipped to show a slowdown in Q3 2018.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon