UK GDP Possibilities – What can we expect for the Pound South African Rand (GBP/ZAR) Exchange Rate?
The near-term outlook for the Pound South African Rand (GBP/ZAR) exchange rate remains largely dependent on Friday’s UK GDP results, a speech from Bank of England (BoE) Governor Mark Carney and the UK’s April consumer confidence reading.
Markets currently expect economic growth in Q1 2018 to climb year-on-year from 1.4% to 1.5%, whilst the monthly reading is forecast to hold steady at 0.4%.
Analysts are slightly concerned, however, that the recent severe weather in the UK and its impact on the services sector might have caused a minor blip in growth.
This outlook was shared by predictions by the EY ITEM Club – with the group forecasting 0.2-0.3% growth – and many other economists who pointed to the possibility that it could raise serious questions over a May rate hike.
Investec Bullish on South African Growth – South African Rand (ZAR) Exchange Rates Find Support
South Africa’s data calendar was rather quiet this week, but the rand (ZAR) did find some support on the back of bullish comments from Investec’s Chris Freund, who claimed that he expects growth to surprise to the upside.
‘People are going to be surprised how South African growth rates are revised upwards’ the South African multi-asset head for Investec Asset Management Ltd stated in an interview. ‘We are bulls on South Africa’s economy’.
On this front Freund is not alone.
Morgan Stanley has also upgraded South African equities to overweight on Wednesday and claimed that its forecasts for economic growth are above consensus for 2018 and 2019.
Beyond that, business confidence appears to be recovering and political risk has ebbed since Jacob Zuma was replaced by Cyril Ramaphosa as President.
Combined, this made the outlook for the South African Rand slightly more positive.
BoE Rate Hike Prospects – What can we expect in May for the GBP/ZAR Exchange Rate?
Markets largely expect a rate hike in May from the BoE, but bank Governor Mark Carney’s comments tomorrow could still put the Pound South African Rand (GBP/ZAR) exchange rate under pressure.
Last week Mr Carney casted doubt on a rate hike occurring, pointing to mixed data regarding the UK’s economy and asserting that he didn’t want to be ‘too focused on the precise timing’ of when the next rate hike will occur.
If he takes this stance once again at his speech tomorrow then market anticipation might fall, potentially dragging Sterling down with it.
This could extend the South African Rand’s brief lead.
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