Pound South African Rand (GBP/ZAR) Exchange Rate Slips after Upbeat SA Data
(Updated 16:36 08/06/23)
The Pound South African Rand (GBP/ZAR) exchange rate is continuing to trend lower this afternoon. An above-forecast rise in South Africa’s manufacturing production levels may be dampening enthusiasm for the currency pair. April’s production levels rose by 3.4% versus the forecast increase of 2.5%.
A narrowing in South Africa’s current account deficit may also be pulling the exchange rate lower. The country’s first quarter deficit narrow to ZAR-66.2bn. The deficit had been forecast to widen to ZAR-172.5bn.
At time of writing the GBP/ZAR exchange rate is at around ZAR23.6480, which is down 0.3% from this morning’s opening figures.
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Pound South African Rand (GBP/ZAR) Exchange Rate Loses Ground as SA to Face Fewer Power Cuts
The Pound South African Rand exchange rate is weakening today. The prospect of stability in South Africa’s power grid may be prompting the pair to fall. Signs of coolness in the UK’s labour market could also be denting confidence in GBP/ZAR.
The GBP/ZAR exchange rate is at around ZAR23.5999, which is roughly 0.5% down from this morning’s opening figures.
South African Rand (ZAR) Rises as Eskom Reduces Load Shedding Measures
The South African Rand (ZAR) is climbing against its rivals today. ZAR may be finding support from news that Eskom will be paring back its load shedding measures. A weaker US Dollar (USD) may also be bolstering the Rand.
State power utility Eskom announced that it will be moving from stage 6 to stage 3 load shedding over South Africa’s winter months. The announcement came as a surprise given that the company had hinted at the possibility of stage 8 measures in recent months. It’s thought that an increased contribution from wind power into the country’s grid is behind the change.
ZAR may be continuing to catch bids off the back of Tuesday’s upbeat GDP figures. The data showed South Africa’s economy expanded by 0.4% in the first quarter of 2023. This bolstered confidence in the country’s economic outlook. Analysts are less optimistic about the country’s prospects, however.
A slump in business confidence earlier in the week may be adding to this downbeat sentiment and keeping pressure on ZAR. The reading for 2023’s second quarter fell to a 20-year low of 27 amid persistent power cuts and higher interest rates.
Speaking on the data, the Bureau for Economic Research (BER) said:
‘Comments by respondents through the different sectors flagged load-shedding as a continued drag on sentiment as it hurts production capacity, increases costs, and negatively affects profitability. As such, respondents highlight that any available capital is going towards load-shedding mitigation measures.’
Pound (GBP) Firms despite Signs of Labour Market Slack
The Pound (GBP) is edging higher today amid persistent BoE rate hike bets. Markets are continuing to price in up to 100bps of tightening by the end of 2023.
The bets are likely subdued today as investors await high-impact employment data next week for any hints regarding any shifts in UK inflationary pressures.
However, signs of coolness in the UK labour market may be capping GBP’s gains today ahead of this next week’s data. The latest survey from the Recruitment and Employment Confederation (REC) saw permanent staff placements fall at its sharpest rate since January 2021. Additionally, staff demand slumped to a five-month low.
Thin trading conditions and a cautious market mood may also be hobbling any gains for Sterling.
GBP/ZAR Exchange Rate Forecast: Will Manufacturing Downturn Weigh on ZAR?
Looking ahead for the Rand, the release of April’s manufacturing production figures later could dent confidence in the currency if they print as forecast. April’s production levels are expected to slide by 0.5% after a strong 4% in March.
ZAR could come under additional pressure if Eskom announces that it will be upping its load shedding measures over the coming days.
The Pound will see no additional data releases this week. Due to this, any movement in Sterling is likely to be driven by BoE rate hike bets.