The South African Rand (ZAR) exchange rate strengthened against the Pound (GBP) and other major peers on Tuesday after the latest Gross Domestic Product (GDP) data showed that South Africa avoided sliding into recession in the second quarter of the year.
Data released by Statistics South Africa showed that the troubled nation’s economy dodged the bullet of a second recession in five years as GDP expanded by 0.6% in the second quarter, recovering the -0.6% of output lost in the first quarter of the year but was below economist expectations for an expansion of 0.9%.
The five-month long strike in the South African Platinum mining sector had harmed the nation’s economy and saw the country lose its place as Africa’s leading economy.
Tuesday’s figures show that the nation’s economy as recovered from its previous weakness.
Pressure on the economy remains high, however as labour and political unrest remain major issues.
Africa’s most advanced economy, and the continent’s second largest, grew by 1% on an unadjusted year-on-year basis in the quarter, against growth of 1.6% in the previous quarter.
South Africa’s Finance Minister Nhlanhla Nene said; ‘The environment has been challenging with strikes and supply-side constraints, particularly on the energy side. That’s added to the challenges we have been confronted with in order to achieve the growth target.’
Following the release of the GDP data the South African Rand strengthened by 0.30% against the Pound.
South African Rand to Pound Sterling Exchange Rate Forecast
The Pound meanwhile was weakened following the publication of disappointing UK mortgage approvals data.
The report created by the British Bankers Association, showed that the number of mortgages approved in the UK increased by 42,800 last month, less than the 44,200-figure forecast by economists.
The figure was the lowest seen in two months and raised concerns that the UK’s housing market is slowing down.
The Bank of England Monetary Policy Committee has said the impact of the regulatory changes should fade, as it delays approvals rather than barring them, but these seasonally adjusted July data show weakness persisting.
With a lack of further UK data releases due for the rest of the session, we can expect the Pound to remain under pressure against the Rand and other major peers.
Geopolitical events in Libya, Ukraine and Iraq however could soften the Rand as investors may favour safe havens over the riskier emerging market currency if the situation in any of those trouble spots worsens.
Sterling Surges against the South African Rand
UPDATE
The Pound surged against the South African Rand on Thursday as negative data releases out of the Eurozone and an escalation in the Ukraine crisis had a negative impact upon the South African currency.
As the Eurozone is one of South Africa’s leading trading partners, negative data and signs that the region’s economy is slowing down reduced sentiment towards the Rand.
Earlier in the week, the Rand had been trading higher after GDP data showed that South Africa had managed to avoid sliding into recession in the second quarter however; the Rand went into decline on Thursday after a report showed that economic sentiment in the Eurozone declined to its lowest level in eight months.
Also weighing upon the Rand was news that Russian forces have crossed the Ukrainian border to support an attack by pro-Russian rebels on the town of Novoazovsk. The denials by Russia that it has interfered in the conflict are faltering as evidence grows of Russian troops and tanks have entered the warzone.
German Chancellor Angela Merkel has demanded an explanation from Russia’s President Vladimir Putin amid the reports of an incursion.
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