GBP/ZAR Exchange Rate Rises by 1% as South African Economic Growth Contracts
The Pound South African Rand (GBP/ZAR) exchange rate soared today, with the pairing currently trading around R19.0418 after South Africa’s GDP figure for the third quarter fell from 3.2% to -0.6%.
Analysts at Bloomberg were downbeat in their assessment:
‘The continued lack of growth will weigh on the government’s revenue collection and make it even more difficult to lower an employment rate that’s close to 30% and that’s seen as one of the biggest obstacles to reducing poverty in one of the world’s most unequal nations.’
South African Rand (ZAR) investors are also becoming increasingly pessimistic about the economy, with today’s growth data likely to slash its remaining investment-grade assessment from Moody’s financial services company.
Meanwhile, US-China trade uncertainty is also weighing market appetite for the risk-sensitive ZAR today, with talks between Beijing and Washington coming under increasing strain.
This follows comments from US President Donald Trump, who said that the new Hong Kong bill –which aims to protect the rights of HK protestors – would not make trade talks any easier.
Hua Chunying, China’s Foreign Ministry spokeswoman, commented:
‘The determination of China’s government to oppose foreign forces interfering in China’s internal affairs is firm and unshakable.’
GBP/ZAR Exchange Rate Soars despite Weakening UK Construction PMI
The Pound (GBP) gained on the weaker South African Rand (ZAR) today despite the release of the UK Markit construction PMI for November, which remained firmly mired in contraction territory at 45.3.
Tim Moore, Economics Associate Director at IHS Markit, was downbeat in his assessment, saying:
‘UK construction output fell again in November as Brexit uncertainty and the forthcoming General Election continued to send a chill breeze across the sector. The speed of the downturn in construction work eased a little since October, but the survey continues to signal a notable drop-off in business conditions compared with the first half of 2019.’
Sterling has, however, benefited from reports that the Conservative Party has maintained its 7-point lead in an opinion poll by ICM for Reuters.
With the Conservative’s being generally preferred by markets, due to their promise to resolve Brexit uncertainty by the end of next month, signs of the Tories consolidating their position ahead of the 12th December general election is Pound-positive.
GBP/ZAR Outlook: Could Deteriorating US-China Trade Relations Further Weigh on ZAR?
Pound (GBP) investors will be awaiting tomorrow’s publication of November’s UK Markit services PMI, which is expected to remain in contraction territory at 48.6.
The report could weaken the GBP/ZAR, however, as markets become increasingly concerned over the health of Britain’s largest sector.
US-China trade developments will continue to drive the South African Rand (ZAR), with any further signs of negotiations deteriorating between the world’s largest economies weighing on the risk-sensitive ZAR.