Pound South African Rand (GBP/ZAR) Exchange Rate Slides as South African Trade Delivers Surprise Surplus

November 29, 2019 – Written by Frank Davies

Stronger South African Trade Dents Pound Sterling South African Rand (GBP/ZAR) Exchange Rate

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate saw a sharp slump ahead of the weekend after a better-than-expected South African balance of trade.

As the trade balance only narrowed to 3.09 billion, rather than falling into a state of deficit as forecast, this encouraged the South African Rand to trend higher across the board on Friday.

This positive showing suggests that the South African economy is not facing such a severe drag from global trade worries as previously thought, in spite of ongoing US-China tensions.

While investors still see reason to doubt the underlying strength of the South African economy this was not enough to weigh down ZAR exchange rates at this stage.

GBP Exchange Rates Falter as UK Consumer Confidence Sticks at 6-Year Low

Support for Pound Sterling, meanwhile, proved generally limited in the wake of November’s GfK consumer confidence index.

Confidence remained at its joint-lowest level since 2013 as the index held steady at -14, putting a fresh dampener on GBP exchange rates.

While this negative reading was widely forecast markets were still unimpressed by the lacking state of UK confidence, with the index having remained out of positive territory for more than four years.

Although net consumer credit showed a strong uptick in October this failed to offer the GBP/ZAR exchange rate any particular support, with confidence in the UK economic outlook muted.

South African Rand Vulnerable to Negative Manufacturing PMI

The mood towards the South African Rand looks set to sour on Monday, however, with the release of November’s South African manufacturing PMI.

Markets expect the index to slide deeper into contraction territory on the month, painting an underwhelming picture of the economy’s resilience.

As long as the manufacturing sector continues to struggle in the face of global trade headwinds this is likely to limit the potential for ZAR exchange rate gains.

Unless the index can deliver a surprise return to growth the South African Rand looks set to come under renewed pressure at the start of the new week.

Weakening South African Growth to Weigh on ZAR Exchange Rates

Further support could be in store for the GBP/ZAR exchange rate if the third quarter South African gross domestic product data also fails to impress.

Forecasts point towards a sharp loss of momentum on the quarter, raising the risk of growth slowing further in 2020.

Evidence that economic activity weakened on both the quarter and the year could put a heavy weight on the South African Rand as market confidence shifts.

Without signs of resilient third quarter South African growth the GBP/ZAR exchange rate may find a rallying point, capitalising on the Rand’s relative weakness.

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TAGS: Pound Rand Forecasts