Pound South African Rand (GBP/ZAR) Exchange Rate Falls as Ramaphosa Outlines Goals for SA Growth

GBP/ZAR Exchange Rate Sinks as SA President Boosts Economic Optimism

The Pound South African Rand (GBP/ZAR) exchange rate is down by 0.5% today and is currently trading around R18.1369 on the inter-bank market.

The South African Rand (ZAR) rose following SA President Cyril Ramaphosa’s State of the Nation Address (SONA) yesterday evening, in which he said that the economy was struggling, but outlined seven priorities for growth and development.

President Ramaphosa said:

‘We will give priority attention to the economic sectors that have the greatest potential for growth.’

‘Drawing on our successes in the automotive sector, we will implement master plans developed with business and labour in industries like clothing and textiles, gas, chemicals and plastics, renewables, and steel and metals fabrication sectors.’

Optimism has returned to SA markets following yesterday’s speech, but many analysts, however, are predicting that the South African Reserve Bank (SARB) could cut interest rates as early as next month.

John Ashbourne, Senior Emerging Markets Economist at Capital Economics, commented:

‘Inflation is now well-anchored within the 3% to 6% target range, and the economy is performing very poorly. We’ve pencilled in a cut from 6.75% to 6.50% at July’s meeting.’

GBP/ZAR Exchange Rate Falls as UK Public Finances under Strain

The Pound (GBP) failed to benefit from the release of the UK public sector net borrowing figures for May, which came in at a larger-than-expected £4.463bn.

Pablo Shah, a Senior Economist at the research consultancy Centre for Economics and Business, commented:

‘The higher than expected borrowing figures over the first two months of the financial year highlight the strain that a slowing economy could place on the UK’s public finances in the months ahead.’

In political news, following last night’s ballot on the Tory leadership, the Foreign Secretary Jeremy Hunt now faces Boris Johnson in the race to secure the role as the next Prime Minister.

However, mounting Brexit fears are causing many Sterling traders to remain skittish.

This came after the Irish Prime Minister Leo Varadkar warned that it is now more likely that the UK could leave the EU on 31 October without a deal with the EU.

GBP/ZAR Outlook: Tory Leadership Race to Remain in Focus

Sterling (GBP) traders will be looking ahead to Monday’s UK inflation report hearings, and with any further signs of dovishness regarding the economy, we could see the GBP/ZAR exchange rate sink further.

South African Rand (ZAR) investors, meanwhile, will be looking ahead to Thursday next week, which will see the printing of the SA Producer Price Index figures for May.

With the SA economy being particularly reliant on China, its closest trading partner, any signs of an improving relationship between the US and China over trade could prove beneficial for the ZAR/GBP exchange rate.

The Pound South African Rand (GBP/ZAR) exchange rate will likely be directed by political developments next week, and with the Tory leadership race eclipsing Brexit debates, Sterling traders are likely to become more jittery.

David Moore

Contact David Moore