(Updated 16:30, 12/11/21)
The GBP/ZAR exchange rate has trended upward over the course of the day as the Rand continues to weaken against the Pound, but has now stabilised.
As of time of writing, the Pound South African Rand exchange rate sits at R20.49336.
Pound South African Rand (GBP/ZAR) Exchange Rate Rises as Rand Falls
The Pound South African Rand (GBP/ZAR) exchange rate has risen steadily this morning as the Rand reacts to poor manufacturing output data and a lacklustre medium-term budget.
As of time of writing, the GBP/ZAR exchange rate is trading at around R20.5018.
Pound (GBP) Steady after Disappointing GDP Figures
The Pound (GBP) is trading cautiously this morning following the news yesterday that economic growth in the UK has slowed significantly.
Data from the Office for National Statistics (ONS) showed that the country’s GDP grew by 1.3% in the third quarter, which was down from 5.5% in the second quarter. A positive note however was that services registered a 30% jump as hotels and restaurants saw increased business during the period.
Despite the easing of COVID-19 restrictions in July, the UK has still struggled with staff shortages and supply issues that have hindered growth in all sectors. Job vacancies are currently at a record high of 2.68 million according to the Recruitment and Employment Confederation, with construction showing a noticeable fall in positions listed as material shortages continue to bite.
Suren Thiru, the head of economics at the British Chambers of Commerce, had the following to say on the data:
‘The latest data confirms that the UK’s economic recovery lost momentum in the third quarter as significant staff and supply shortages limited activity. Although monthly output rebounded through the quarter from July’s contraction this is more likely to reflect a temporary boost from restrictions easing, rather than a meaningful improvement in the UK’s underlying growth trajectory.’
The UK’s trade performance has also hindered its economic recovery, as the trade deficit widened further to £-2.8bn. Whilst this was well under forecasts of £-3.4bn, exports to the EU have continued to fall whilst imports of oil from non-EU countries has risen.
South African Rand (ZAR) Dips as Production Slows, Budget Gives Hope
The South African Rand (ZAR) fell overnight as production data for the country came in well below forecast.
Gold, mining, and manufacturing production all came in well below forecast as South Africa continues to battle significant amounts of state-led debt.
Finance minister Enoch Godongwana’s first medium-term budget policy statement may also have prompted fresh movement in the Rand. Whilst his tone differed little from his predecessor, South Africa’s GDP growth rate was revised up to 5.1% from 3.3%. Godongwana attributed this to the easing of COVID-19 restrictions, lower interest rates, and higher commodity prices.
The budget was welcomed cautiously by economists and analysts. Casey Delport of Anchor Capital had positive words regarding the finance minister’s performance:
‘Markets will be relieved at the policy continuity and a strong intent of becoming more pro-growth via collaboration with the private sector through public-private partnerships etc. Nonetheless, the fiscal risks remain elevated, with plenty of execution risk. The repeatedly announced growth initiatives are still lacking in detail and, overall, debt stabilisation remains distant.’
GBP/ZAR Exchange Rate Forecast: Will UK Data Print Below Forecast?
Looking at the rest of the day, there is no further significant data for either currency. Bank of England (BoE) board member Jonathan Haskel is due to speak later, which may provide further insight into the central bank’s interest rate decision. A particularly dovish or hawkish tone from Haskel may prompt movement in the Pound.
As we look ahead to next week, both the UK and South Africa will release inflation rate data. UK inflation is forecast to rise even further to 3.9%, which is likely to prompt bets by investors looking to the BoE for an early interest rate hike.
The UK will also see fresh employment data next week which is forecast to show a fall from 235K in work to 195K. This could cause further movement in the Pound, as rising unemployment may give fresh impetus for the BoE to raise interest rates ahead of schedule. Members of the central bank’s Monetary Policy Committee (MPC) who voted to leave rates unchanged last month had previously stated that they were waiting on fresh employment data before making a decision.
South African inflation is also forecast to rise slightly from 5% to 5.2%, which would represent a third consecutive month of growth. ZAR is likely to remain volatile throughout the week as investors await this data and closely watch commodity prices. The South African Reserve Bank (SARB) may also prompt fresh movement in the Rand, as analysts predict that an early interest rate rise may be coming after their November meeting next week.