Search the Community

The Pound (GBP) has fallen by -0.8% against the South African Rand (ZAR) today, trading an exchange rate of ZA17.4861. This deterioration follows the news that UK business optimism has fallen during Q3 2018, alongside a slight slowdown in industrial orders growth during July. Pound Sterling remains at risk of additional losses in the week ahead, specifically when GfK consumer confidence data is released on 31st July. This is tipped to show a deterioration of an already-negative -9 point reading from May, with a shift to -10 points. This is considered high-impact UK data, so the Pound to Rand exchange rate (GBP/ZAR) could well decline on the news. Will BoE Interest Rate Decision cause pound to rand Exchange Rate Turbulence? Looking beyond next week’s consumer confidence reading, the main economic news of the coming week will be 2nd August’s Bank of England (BoE) interest rate decision. Some economists believe that BoE officials will commit to raising interest rates from 0.5% to 0.75%, which would be the first ‘real’ rise since 2007. For context, the BoE cut interest rates from 0.5% to 0.25% in 2016 and returned them to 0.5% in 2017, but since then rates have been left untouched. Whether a Pound-boosting rate hike materialises this week is down to how BoE policymakers respond to last week’s UK data. This was largely negative, showing slowing wage growth, flat inflation and worse-than-expected retail sales activity. If policymakers hold off on raising interest rates in August then the Pound could drop against the Rand, owing to GBP trader disappointment on unmet expectations. South African Rand to Pound (ZAR/GBP) Exchange Rate Forecast to Fall on ZA Unemployment The South African Rand (ZAR) is at risk of declining against the Pound (GBP) in the week ahead, when ZA unemployment rate data is released on 31st July. Unfortunately for the Rand, current estimates are for a worsening of the already sizable unemployment rate of 26.7%, with a shift up to 27%. Predictions are for 5.9m more unemployed persons and all signs point to South Africa continuing to struggle with joblessness near to the highest levels of the 2010’s. Will ZA Trade Balance Growth Push the ZAR/GBP Exchange Rate Up? The coming Tuesday might not be entirely negative for South African Rand (ZAR) traders, as ZA trade data could still push the Rand up against the Pound (GBP). This will be June’s trade balance reading, which is currently tipped to show an expansion of the existing surplus with a shift from ZAR3.52bn to ZAR5.9bn. Such results would mean that South Africa exports more than it imports, which is a beneficial situation for the nation’s mining and resource-exporting companies. South Africa is running on three consecutive trade surpluses, so another positive reading could encourage Rand traders and cause a ZAR/GBP exchange rate rise.

Whilst the outlook for the Pound remained leagues ahead of the South African Rand (GBP/ZAR) on Wednesday, investors were concerned by some cautious statements in the latest financial stability report. According to the central bank, progress has been made in preparing the UK’s financial sector for Brexit, but significant ‘material risks’ remained in the form of a lack of preparation on the EU’s part. The bank stressed that the EU had not put measures in place to allow temporary permissions for UK entities to service contracts with customers in the European Economic Area – something that could result in massive difficulties for firms restructuring or transferring contacts. This news did little to harm the GBP/ZAR exchange rate on Wednesday, but investors did grow slightly bearish in outlook, with the looming European Summit also a potential cause for concern. Brexit and the Looming European Council Summit – What can we Expect for the rand to the pound exchange rate? The main event this week for Sterling will likely be the European Council summit in Brussels, which starts on Thursday. Investors, businesses and union leaders across the UK all seem rather desperate for signs of pace and urgency in negotiations, with many calling for measurable progress to be achieved. Indeed, the CBI, Business Europe, the TUC and the European Trade Union Confederation have come together to issue a joint statement, stating: ‘We are calling on the UK government and the EU to inject pace and urgency in the negotiations, bringing about measurable progress… Decisions will be needed in June and October to finalise the withdrawal agreement and the transitional agreement and put economic interests and people’s jobs, rights and livelihoods first’. Whether the EU summit will actually yield progress remains to be seen, but if agreement is reached then we could see GBP continue on its surge against the South African Rand. South African Rand (ZAR) Exchange Rate Outlook Poor amid Frenzied Bond-Sell-off The South African Rand (ZAR) tumbled against the majors on Wednesday as markets responded to news that foreign investors have sold near $2.5bn worth of South African bonds between January and June – marking the highest sell-off on record. This move was largely driven by the ongoing trade spate between the US and China, and coincided with a massive correction in the price of the Rand, which investors viewed as overpriced after the hysteria of Cyril Ramphosa’s election. Looking ahead, investors will be paying close attention to the looming South African PPI results, due on Thursday, and the South African balance of trade readings, due on Friday, with both releases capable of fostering or ruining demand for the Rand.