Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Rises 0.9% on Rand Weakness

August 17, 2018 – Written by Toni Johnson

On Thursday, the Pound opened trading against the South African Rand at a level of 18.5373 and closed slightly higher around 18.7123.

This appreciation in the GBP/ZAR exchange rate was caused by the news that UK retail sales activity had risen in July, beating forecasts across the board.

While this news raised confidence among GBP traders and pushed the Pound to Rand exchange rate higher, the news wasn’t universally well-received.

Capital Economics UK Economist Andrew Wishart responded cautiously to the news, saying that:

‘[These figures suggest] some recovery in consumer spending is in the pipeline.

‘Of course, retail sales only account for about a third of total household spending, so the strength of spending on the High Street could be offset by households reducing their outlay elsewhere.’

This background scepticism ultimately limited GBP/ZAR gains, not least because it raised uncertainty about how physical shops could struggle in the face of online spending, potentially leading to future job losses.

Today’s Pound to Rand Exchange Rate Movement: GBP/ZAR Exchange Rate Rises on Low ZAR Trader Confidence

Pound Sterling (GBP) has risen by 0.8% against the South African Rand (ZAR) today; this is mainly down to the Rand being in much lower demand than GBP.

UK economic news hasn’t been especially supportive today – the headline news has been another warning about the consequences of a no-deal Brexit, this time coming from Foreign Secretary Jeremy Hunt.

Mr Hunt has given a dire prediction for what leaving the EU without a Brexit deal could mean, warning that it would be a ‘mistake we would regret for generations.’

Despite later stating that the UK would still be able to cope with a bad Brexit deal, GBP traders remained wary after his remarks and the Pound’s gains against the Rand have been capped today.

Another Brexit story that has limited GBP/ZAR gains today has been a warning from the British Medical Association (BMA), which cautioned that there was an increased risk of disease pandemics after a no-deal Brexit because of reduced communication between the UK and EU.

South African Rand to Pound (ZAR/GBP) Exchange Rate Slides on Gloomy Economic Forecast

The Rand (ZAR) has fallen against the Pound (GBP) and peers like the Euro and US Dollar today, as confidence in South Africa’s economic stability dwindles.

These ZAR/GBP exchange rate losses come after ratings agency Moody’s predicted that the South African economy would struggle because of weak growth and falling levels of consumer spending.

Moody’s Senior Vice President Lucie Villa outlined the bank’s forecast, saying:

‘Growth this year is expected to be lower than the government’s own estimates, weighing on tax revenues, while the public sector wage agreement in June also brings extra, unbudgeted costs.’

Future Pound Sterling to South African Rand Exchange Rate Forecast: Are GBP/ZAR Gains ahead on UK Borrowing Data?

The Pound’s (GBP) recent advance against the South African Rand (ZAR) could improve on the coming Tuesday, when UK government borrowing data is due for release.

Current expectations are for the UK’s borrowing deficit to have reduced in July, which might be enough to spur greater Pound to South African Rand trading.

Although the borrowing deficit isn’t expected to shift into a desirable surplus range, the Pound could still advance against the Rand because of hopes for an eventual spending surplus.

There will also be Confederation of British Industry (CBI) industrial orders data out on Tuesday – this is tipped to show increased orders during August and could push the GBP/ZAR exchange rate higher.

Next week’s main South African economic news will be inflation rate figures for July, which are currently expected to show a faster pace of price growth across the board.

The South African Reserve Bank (SARB) inflation target is between 3% and 6%; current expectations are for the rate of price growth to rise from 4.6% to 4.8% for the base annual reading.

Higher inflation increases the chances of a SARB interest rate hike in the future; such action can boost demand for the Rand as among other effects, it improves conditions for savers across South Africa.

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TAGS: Pound Rand Forecasts