GBP/ZAR Exchange Rate Forecast: South African Growth Surges, Will Rand Rally Last?

GBP/ZAR Exchange Rate Tumbles Following BoE’s No-Deal Brexit Warning

The Pound South African Rand (GBP/ZAR) exchange rate suffered its third consecutive session of losses last week as the pairing was undermined by further Brexit angst.

Initial GBP losses were triggered by Donald Trump’s suggestion that Theresa May’s Brexit deal could hurt a future UK-US trade deal.

However, it was publication of the Bank of England’s (BoE) Brexit deal analysis that really appeared to put the pressure on Sterling last week as the bank’s report warned (in a worst-case scenario) that a no-deal Brexit could cause the largest crash in the UK economy since the great depression.

This was followed by further remarks from BoE Governor Mark Carney as he added that the UK economy isn’t ready for a no-deal scenario.

Meanwhile, the South African Rand surged in the middle of last week as Federal Reserve Chair Jerome Powell dampened Fed rate speculation by suggesting US interest rates are ‘just below’ neutral, weakening USD and bolstering demand for emerging-markets.

However the Rand was forced to cede some of these gains at the end of the session as investors became nervous ahead of a meeting between Trump and Chinese President Xi Jinping on the side lines of the G20 summit.

South African Rand (ZAR) Exchange Rates Jump as Domestic GDP Roars Back to Life

The South African Rand (ZAR) has strengthened against the Pound (GBP) and the majority of its other peers this morning as ZAR investors cheer the release of South Africa’s latest GDP figures.

According to data published by Stats SA, domestic GDP leapt from -0.4% to 2.2% in the third quarter, beating expectations of a more modest 1.6% expansion.

The news comes as a welcome relief to ZAR investors as it pulls the country out of a technical recession, while the stronger-than-expected growth also bolsters hopes for year-on-year growth.

GBP/ZAR Exchange Rate Forecast: Sterling to Remain Pressured by Brexit?

Looking ahead, the Pound South African Rand (GBP/ZAR) exchange rate is likely to remain under pressure this week as markets stay focused on UK politics in the run up to next week’s Parliamentary vote on the PM’s Brexit deal.

This will involve five days of debate on the deal, with Sterling sentiment likely to remain soft so long as it appears likely that the deal will be voted down by MPs on 11 December.

The UK’s latest Services PMI may place even more pressure on GBP/ZAR this week, with economists forecasting that growth in the UK’s largest wealth-generating sector is likely to have remained subdued in November.

Meanwhile, the temporary trade truce between the US and China bodes well for the South African Rand for the foreseeable future, with analysts forecasting that the easing of trade tensions may help to prolong an emerging-market rally through to 2019.

Matthew Andrews

Contact Matthew Andrews