Pound to South African Rand (GBP/ZAR) Exchange Rate Sinks, China’s Manufacturing Uptick Boosts ZAR

GBP/ZAR Exchange Rate Falls as China’s Manufacturing Boost Strengthens South African Rand

The Pound to South African Rand (GBP/ZAR) exchange rate fell by -0.5% today, with the pairing currently trading around R22.542.

The South African Rand (ZAR) benefited from China’s factories strong start in September, with the world’s second-largest economy’s industrial sector posting its strongest growth in nearly a decade.

As a result, the risk-averse ZAR has benefited from signs that South Africa’s largest trading partner is on the road to recovery.

Dr Wang Zhe, a senior economist at Caixin Insight Group, was optimistic in his analysis, saying:

‘Overall, the post-epidemic economic recovery in the manufacturing sector continued. Supply and demand expanded with the pickup in overseas demand. Backlogs of work continued to increase. Both quantity of purchases and stocks of purchased items also grew.’

Meanwhile, South African Rand (ZAR) traders will be awaiting today’s release of South Africa’s business confidence index for August. Any improvement could further buoy the ZAR/GBP exchange rate.

Brexit No-Deal Fears Drag Down Pound (GBP)

The Pound (GBP) fell today after concerns over Brexit have continued to grow after it was announced that Michel Barnier, the EU’s Chief Brexit Negotiator, would be heading to London to engage in informal UK-EU trade negotiations.

As a result, Sterling has suffered as the prospect of a no-deal scenario looms at the end of this month.

A spokesperson for the British Government accused the EUY of making it ‘unnecessarily difficult to make progress’ in Brexit talks, adding:

‘We have been clear from the outset about the principles underlying the UK approach: we are seeking a relationship that respects our sovereignty and which has a free trade agreement at its core, similar to those the EU has already agreed with like-minded countries.’

In UK economic news, today will see the release of August’s final manufacturing PMI, which is expected to hold at 55.3. Any signs of significant improvement would prove GBP-positive.

Today will also see the release of July’s UK mortgage approvals figure. However, with this forecast to fall we could see the GBP/ZAR exchange rate range lower.

GBP/ZAR Forecast: Could Informal Brexit Talks Lead to a Breakthrough?

South African Rand (ZAR) investors will continue to eye developments in the global economy. If China’s economic recovery continues to progress, then we would see the risk-sensitive ZAR edge higher.

Pound (GBP) traders will be looking ahead to tomorrow’s speech from Andrew Haldane, the Bank of England’s (BoE) Chief Economist. Any dovishness about the British economy, however, would prove GBP-negative.

Brexit developments will continue to drive the GBP/ZAR exchange rate this week. If informal talks between the UK Chief Negotiator, David Frost, and Michel Barnier improve, then the GBP/ZAR exchange rate could clawback some of its losses.

David Moore

Contact David Moore