Pound South African Rand (GBP/ZAR) Exchange Rate Slumps amid Dour UK Economic Outlook

Pound South African Rand (GBP/ZAR) Exchange Rate Falls as UK Business News Shows Ailing Economy

The Pound South African Rand (GBP/ZAR) exchange rate is falling this morning as UK businesses outline a bleak economic future.

At the time of writing, GBP/ZAR is trading at roughly R20.3718, a drop of around 0.4% from the morning’s opening rates.

Pound (GBP) Cracks as Domestic News Paints Bleak Economic Picture

The Pound (GBP) is weakening today, with an absence of macroeconomic data leading to investors focusing on domestic news.

Following the announcement that the UK has entered an economic recession, retailers have been adding to Sterling’s woes. A spate of large UK businesses outlined how the current economic state has affected them.

Marks and Spencer and Wetherspoons were the chief catalysts here, with both businesses warning of future challenges and lower profits. With M&S pointing to a ‘gathering storm’, investors are mindful of the impact the cost-of-living crisis is having on UK households. As such, investors moved away from GBP.

With bleak news from large UK businesses and slumping house prices, Sterling may be unable to recover later today.

South African Rand (ZAR) Shores Up as World Bank Promises Energy Investment

The South African Rand (ZAR) is buoyant this morning, as the World Bank approves a loan to aid South Africa’s energy transition.

The plan includes a World Bank loan of R8bn and R870m from the Canada-World Bank Clean Energy and Forest Climate Facility. A further R183m grant from the World Bank’s Energy Sector Management Assistance programme was also included.

With the country continuing to be afflicted by load-shedding, the news provided optimism for ZAR investors. It involves transitioning the decommissioned Komati plant into a renewable station comprised of solar, wind and battery power.

World Bank President David Malpass spoke about the transition, stating:

‘We are cognizant of the social challenges of the transition, and we are partnering with the government, civil society, and unions to create economic opportunities for affected workers and communities.’

As such, investors flocked to the Rand, with the plan offering optimism towards South Africa’s economic and environmental future. The support has allowed ZAR to make gains despite a risk-averse market mood.

Pound South African Rand Exchange Rate Forecast: UK GDP to Dent Sterling?

Looking ahead for GBP/ZAR, the core catalyst of movement for the pairing is likely to be Friday’s upcoming UK GDP releases.

With MoM and Q3 GDP growth expected to show contractions, the Pound may weaken. Should the data print as forecast, it will reflect on the UK’s economic woes and stoke recession fears.

For the South African Rand, Thursday brings manufacturing production data for September. A fall from 2.1% to 0% is expected, which may weaken ZAR due to the export-dependent nature of the economy.

Elsewhere, Silvana Tenreyro, a policymaker from the Bank of England (BoE), is scheduled to speak on Thursday. If she continues the BoE’s dovish tone, Sterling may weaken further.

John Mulcahey

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