GBP/ZAR Exchange Rate Undermined by Manufacturing PMI
The Pound South African Rand (GBP/ZAR) exchange rate is up by 0.75% on Tuesday morning, trading at an inter-bank rate of 17.859.
Last week it was a different story, with GBP/ZAR struck by a heavy sell-off amid growing speculation that the US Federal Reserve may pause interest rate rises in 2019.
However this was mostly focused in the latter half of the week, with GBP/ZAR remaining rangebound at the start of the week amid thin trading over the New Year period.
Sterling’s fortunes then began to change as markets re-opened on Wednesday, as a rise in the UK’s latest manufacturing PMI was undermined by suggestions it had been inflated by Brexit stockpiling.
Meanwhile the Rand’s advance suffered a minor setback overnight on Wednesday, as currency markets were rocked by a flash crash which resulted in investors dumping risk-sensitive assets.
However it didn’t take long for ZAR to resume its uptrend amid signs US interest rates may not rise quite as quickly as expected last week.
It came in the wake of some dovish comments from Fed Chair Jerome Powell, who highlighted the downside risks to the US economy and suggested that the bank’s monetary policy would remain ‘sensitive’ to any signs of an economic slowdown.
This was immediately interpreted by currency traders as an admission that the Fed could pause its scheduled rate hikes in 2019.
Pound Rand (GBP/ZAR) Exchange Rate Bolstered by Surge in UK House Prices
After striking a one-month low against the South African Rand (ZAR) at the start of this week, the Pound (GBP) is rallying this morning on the back of some stronger-than-expected UK housing data.
According to Halifax’s latest house price index, UK house price growth surged from -1.2% to 2.2% in December, flying past expectations of a modest 0.2% rise and striking the highest levels since July.
Halifax’s managing director Russell Galley suggested this uptrend is likely to persist through 2019, but warned that Brexit still poses risks.
‘In 2019, we’re expecting continued stability in house prices with between 2% and 4% price inflation. However, this expectation will clearly be dependent on the Brexit outcome, with risks to both sides of our forecast.’
GBP/ZAR Exchange Rate Forecast: Brexit Uncertainty to Drag on Sterling Sentiment this Week?
Looking ahead to the rest of the week, movement in the Pound South African Rand (GBP/ZAR) exchange rate looks set to be driven by Brexit.
MPs will debate Theresa May’s EU withdrawal bill this week in advance of a House of Commons vote scheduled to take place on 15 January, with Sterling sentiment likely to plummet if it looks likely that MPs will reject May’s deal as it opens the door for a possible no-deal Brexit.
However, potentially drawing attention away from Brexit at the very end of the week will be the release of the UK’s latest trade and GDP figures, with any indication that domestic economic activity improved in November likely helping to bolster GBP exchange rates.
Meanwhile the Rand may struggle following the release of South Africa’s latest manufacturing index, with economists forecasting that the country’s factory sector will have remained in contraction territory in December.
If this is true, we can expect to see a further appreciation in the Pound South African rand (GBP/ZAR) exchange rate over the coming week.