Pound to South African Rand (GBP/ZAR) Exchange Rate Volatile amid BoE and South African Manufacturing Concerns

Pound to South African Rand Exchange Rate Lower as Rand Holds Most of its Rebound

A surprisingly dovish stance from Bank of England (BoE) Governor Mark Carney left the Pound Sterling to South African Rand (GBP/ZAR) exchange rate lower. This week’s South African Rand (ZAR) rebound has been largely sustained, despite poor South African data.

After opening this week at the interbank level of 18.71, GBP/ZAR briefly saw stronger demand and touched on a high of 18.93 before tumbling yesterday and falling lower today.

The GBP/ZAR interbank level touched on a fresh January low of 18.39 this morning. At the time of writing, the pair is trending closer to the level of 18.49.

Sterling’s (GBP) losses against the Rand are limited due to today’s Rand weakness. The pair is still performing worse than many other major Pound exchange rates this week however.

Pound (GBP) Exchange Rates Slump on Fresh Bank of England (BoE) Interest Rate Cut Bets

More cautious Brexit speculation had already been weighing on the Pound (GBP) over the past day. The Pound took an even bigger hit from today’s surprising Bank of England (BoE) news.

In a morning speech, BoE Governor Mark Carney indicated that the bank was willing to loosen monetary policy if Britain’s economic outlook worsened.

It reflects the dovishness of some BoE policymakers in recent decisions, as well as concerns that Brexit uncertainty could negatively impact Britain’s economic activity. The Pound plummeted in reaction to the comments.

According to Andy Scott, Associate Director at Financial Consultant JCRA:

‘… the UK economy only managing around 1% last year while the US grew at 2%. This suggests the Bank of England could justify an ‘insurance’ rate cut due to continued Brexit headwinds which may ease temporarily, but could still turn into a hurricane come December!’Bankdsfsfsafdsafdasdas

Julianna Tatelbaum from CNBC tweeted:

South African Rand (ZAR) Exchange Rates Struggle amid Concerning South African Data

Yesterday, investors piled into the South African Rand (ZAR) as markets rebounded from days of US-Iran military tensions.

As the South African Rand is a currency often correlated to risk sentiment, calmer markets helped the Rand to put in strong gains after days of trending near lows.

However, while the Rand pushed GBP/ZAR lower yesterday, today’s Rand strength has been highly limited.

Investors are hesitant to keep buying the Rand, as today’s South African ecostats were highly disappointing.

South African manufacturing contracted at a concerning -3.6% year-on-year according to today’s data. On top of this, South Africa’s average business confidence in 2019 was its lowest in three decades.

According to SACCI, which collects the business confidence report:

‘The economy’s potential is wavering and requires positive corrective steps to direct the economy in an appropriate direction,’

Pound to South African Rand (GBP/ZAR) Exchange Rate Awaits Geopolitical Developments

Amid a lack of notable UK or South African data due for publication until next week, the Pound to South African Rand (GBP/ZAR) is more likely to be influenced by geopolitical news in the coming sessions.

Any surprising developments in the Brexit process, or indications for how UK-EU Brexit negotiations could unfold, will drive the Pound (GBP).

Meanwhile, the risk and trade-correlated South African Rand (ZAR) will be influenced by any potential developments in global tensions.

For example, if US-Iran tensions continue to lighten and markets become more confident that there will be no further escalation, investors may feel more comfortable buying the South African Rand.

However, economic concerns will continue to weigh on both currencies as well. If Bank of England (BoE) concerns persist GBP/ZAR will struggle to advance, but a Rand weakened by a poor economic outlook would struggle to pull GBP/ZAR lower.

Looking ahead to next week, UK growth stats and the South African Reserve Bank’s (SARB) January policy decision will be in focus for the Pound to South African Rand (GBP/ZAR) exchange rate.

Josh Jeffery

Contact Josh Jeffery