The British Pound to South African Rand (GBP/ZAR) exchange rate was trending lower in Wednesday’s European session after UK Manufacturing Production figures slipped instead of rising in line with forecasts.
Economists had predicted the January ecostat would rise from 2.4% to 2.6%; however, the actual figure slipped to 1.9% and the December number was positively revised to 2.6%.
The UK Treasury responded to the disappointing fall saying: ‘Today’s figures from the ONS show manufacturing output grew by 2.6% in the three months to January compared to a year ago. The UK has seen the fastest growth in the G7 but is not immune to the risks facing the global economy.’
‘The job is not yet done and all of the progress we have made will be at risk unless we carry on working through the long-term economic plan which is delivering economic security.’
However, the annual Industrial Production figure rose from an upwardly revised 0.8% to 1.3% in January.
South African Rand (ZAR) Exchange Rate Falls on Business Confidence
Meanwhile, the South African Rand was offered little support on Tuesday when the Business Confidence Index (BCI) slid from 51 to 49 in the first quarter.
Rand Merchant Bank (RMB) commented: ‘This means respondents are about evenly split between those that are satisfied and unsatisfied about prevailing business conditions.’
However, tumbling inflation the world over as a result of oil prices was seen to be having a positive effect on conditions by respondents.
RMB continued: ‘By the same token, however, the negative impact of load shedding and other constraining factors have depressed confidence among respondents doing business on the production-side of the economy.’
‘Dealers of semi-durable and non-durable goods selling mainly to low income earners (and on credit) no longer seem to be the best performers.’
South African Mining and Manufacturing Production data will be out on Thursday.
British Pound to South African Rand (GBP/ZAR) Exchange Rate Forecast
The South African Rand has felt the effects of hypothesis surrounding the US Federal Reserve and interest rate increases in the near future.
Some economists have suggested that the South African Rand could slip to all-time lows versus the US Dollar (ZAR/USD) as emerging market currencies remain weaker against the backdrop of a strong US economic recovery and tighter monetary policy plans.
Strategist Mohammed Nalla commented: ‘The guys are now pricing in a hike by the Fed in June. Until we can see some sort of credible reversal in the Dollar strength, the Rand is likely to remain under pressure.’
Meanwhile, the British Pound is also strengthening on prospects of central bank action. The Bank of England (BoE) is forecast to hike interest rates this year—a hypothesis that’s kept the Pound buoyant.
The rest of the week will see several BoE representatives speak at various events and investors will be watching out for any hawkish comments.
The US Dollar to South African Rand (USD/ZAR) exchange rate is residing at 12.3397. The British Pound to South African Rand (GBP/ZAR) exchange rate is trending in the region of 18.5770.
