Pound South African Rand (GBP/ZAR) Exchange Rate Trades at Two-Month Low Following Upbeat SA GDP Figures

Pound South African Rand Exchange Rate Stumbles in Wake of SA GDP Release

The Pound South African Rand (GBP/ZAR) exchange rate is struck trading at a near two-month low this morning as investors continue to digest South Africa’s latest GDP figures. 

At the time of writing the Pound South African Rand exchange rate is trading at around ZAR19.7095, virtually unchanged from this morning’s opening rate. 

South African Rand (ZAR) Buoyed as SA GDP Beats Expectations  

The South African Rand (ZAR) remains well supported against the Pound (GBP) this morning, following the publication of South Africa’s latest GDP figures on Tuesday. 

According to data published by Statistics South Africa, the domestic economy expanded by 1.2% in the second quarter, this was up from the 1% expansion recorded in the first three months of the year and best expectations that growth would slow to 0.7%. 

The uptick in growth was linked to an improvement in activity in the Transport and communication and the agricultural sectors. 

The stronger-than-expected expansion of growth in the second quarter reflected well on the Rand as it helps to cushion concerns about an impending slowdown in growth in the third quarter as a result of widespread civil unrest following the arrest of former president Jacob Zuma. 

Peter Attard Montalto, head of capital markets research at Intellidex, commented: 

‘The economy has overall shown itself better at recovering in the past year than initially expected — either at the start of Covid-19 or into this data — but there is still significant uncertainty over the impact the unrest will have in the short term and longer term into lower investments.’

Meanwhile, there are also concerns for growth in the fourth quarter as health experts warn South Africa could face a fourth wave of coronavirus infections this winter. 

Pound (GBP) Subdued amidst Tax Rise Concerns 

At the same time, the Pound (GBP) remains depressed this morning as GBP investors express concern about Boris Johnson’s plans to increase national insurance contributions by 1.25%. 

The tax increase is being billed as a healthcare levy and is designed to pump an additional £12bn into the NHS and social care, but has already met fierce criticism from many of those within Johnson’s party. 

GBP investors appear particularly concerned by the potential pressure the national insurance increase could put on businesses, as some warn it could lead to job losses. 

Also weighing on Sterling sentiment this morning is renewed Brexit uncertainty, as markets fear that the UK government’s move to unilaterally extend the grace period on Irish Sea border checks could result in the EU taking legal action. 

Pound South African Rand Exchange Rate Forecast: Slowing UK GDP to Weigh on Sterling? 

Looking ahead, the Pound South African Rand (GBP/ZAR) exchange rate could face additional pressure through the second half of this week, particularly in the face of the UK’s latest GDP figures. 

Economists forecast these will show that UK economic growth slowed in the three months to July, likely sending Sterling lower following their release on Friday. 

Meanwhile, in the absence of any notable ZAR data releases, the direction of the South African Rand is likely to be driven primarily by risk appetite, potentially leading to losses if market sentiment continues to sour.