- UK currency deflates after previous rally caused by BoE news
- Rand remains weak against rivals after production flop
- Sliding economic power in Africa adds to ZAR’s woes
- UK and South African inflation rate data due next week
The Pound has dived against the majority of its peers, with yesterday’s bullish performance, brought on by Bank of England (BoE) news, ebbing away overnight.
The South African Rand, meanwhile, has extended declines, having been damaged today by further evidence of South Africa’s declining economic fortunes.
UK Economic News: GBP Down after BoE Announcements, Poor UK Construction Data
The Pound has fallen across the board today, essentially returning to pre-BoE announcement levels.
This is likely due to the temporary nature of the BoE-induced news, as well as the fact that the day’s only UK data has come out worse than expected.
Although losses had been forecast for UK construction output in March, the prediction-exceeding drop from -0.9% to -3.6% on the month and from -0.4% to -4.5% on the year painted a highly negative picture of the state of the UK industry.
With sources from all sides involving themselves in the increasingly unstable EU Referendum campaign and BoE Governor Mark Carney’s warning that a recession could come from a ‘Brexit’ vote still fresh in mind, it seems unlikely that the Pound will manage to recover before next week.
Pound movements of note have included gains of 0.3% against the South African Rand (GBP/ZAR) and the Thai Baht (GBP/THB) and losses of -0.2% against the US Dollar (GBP/USD) and the Hong Kong Dollar (GBP/HKD).
South African Rand Continues to Fare Poorly, SA Production Data Provides Cause for Concern
The Rand has remained weak against the diminished Pound and other peers today, with these declines being an expansion of yesterday’s universally disappointing mining, gold and manufacturing results for March, all of which either fell into or remained in negative ranges.
Adding to the damage caused by these announcements has been the latest report from the International Monetary Fund (IMF), which has seen Egypt overtake South Africa in the rankings of the largest economy of Africa. South Africa now rests in third place; the top spot is taken up by Nigeria.
Lullu Krugel, Chief Economist at accountancy and advice firm KPMG, has reacted to the news by saying:
‘Psychologically, I do think this is a blow. We’ve always thought of ourselves as the powerhouse of Africa, and then we’re number two and now we’re pushed to number three’.
Future GBP, ZAR Forecast: Inflation Data, SARB Interest Rate Decision Ahead
Today is unlikely to bring any further dramatic movement for the pairing given the lack of domestic data, therefore it will be up to next week’s UK and South African inflation stats to generate the next big moves for the pairing.
Tuesday will bring the UK inflation stats for April, while Wednesday will see the announcement of the South African results for the same period. Forecasts have been for a UK decline on the month and the year, while for South Africa a monthly rise and annual slip is expected.
Also of interest next week will be the South African Reserve Bank (SARB) interest rate decision on Thursday, which is expected to result in a rate freeze at 7%.
Current GBP, ZAR Exchange Rates
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate was trending in the region of 21.7900 and the South African Rand to Pound Sterling (ZAR/GBP) exchange rate was trending in the region of 0.0459 today.
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