The Pound Sterling to South African Rand (GBP/ZAR) exchange rate softened following the release of better than forecast South African Gross Domestic Product (GDP) data.
The Pound Sterling to South African Rand exchange rate hit a session low of 17.926
Earlier in the session, the Pound had been trading strongly against the Rand as the market awaited the GDP report, as sentiment to riskier emerging market assets remained under pressure due to the uncertainty caused by the Greece crisis, and as investors awaited a semi-annual testimony to the US Congress by Federal Reserve Chairman Janet Yellen.
The Rand strengthened as data released by Statistics South Africa showed that the South African economy expanded by a pace of 4.10% in the fourth quarter of 2014. The figure was a strong rise from the previous figure of just 1.4% and beat economist expectations for a figure of 3.4%. On an annual basis, GDP grew by 1.3%, below the previous figure of 1.4% but was still better than expectations for a rise of 1%.
Pound Sterling to South African Rand exchange rate forecast
Sterling could make further losses or could rally today depending on what is said by Bank of England Governor Mark Carney when he testifies to the House of Commons Treasury Committee. Any hints that BoE policy makers are getting closer to announcing an interest rate rise and the Pound will strengthen. However, if the testimony is more dovish than expected we can expect the currency to fall.
The Rand meanwhile will see further movement as Finance Minister Nhlahla Nene is due to deliver the latest national budget speech. Economists are expecting Nene to keep to his budget deficit target made in October. The minister needs to curb spending and alleviate concerns raised by credit rating agencies and economists.
‘It will be a pretty fine balancing act. They have to find taxes that will not be too punitive to the economy. But ultimately tax increases as opposed to debt issuance would be far more positive for the bond market,’ said Asher Lipson, head of fixed income strategy at Standard Bank.
Analysts are divided about which taxes Mr Nene will increase to raise an extra R12bn he proposed in the October 22 mid-term budget. A 28% drop in petrol prices in the past six months may give authorities room to raise fuel duties.
