‘Delicate Balance’ Enhances British Pound to South African Rand (GBP/ZAR) Exchange Rate
The British Pound to South African Rand (GBP/ZAR) exchange rate has shifted and Sterling has rallied by 0.58 percent (at 15:41GMT).
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The Rand has been under-performing this week and looks set to continue on its bearish trend.
It’s come at an unfortunate time as the Rand has been attempting to recover from a sustained 10 week low after fears of a falter in economic growth as a result of prolonged platinum mining strikes, which accounted for 4.4 per cent negative growth in the first quarter and lower commodity prices.
The Governor of the South African Reserve Bank, Gill Marcus, hasn’t exactly instilled confidence in the nation’s future prospects and drove the Rand lower by saying, ‘We are therefore in for a bumpy ride… We can expect financial markets, including the rand exchange rate, to remain volatile.’
Although Marcus recognises the ‘enormous challenges ahead’ she also suggests that the last quarter has had a positive 0.6 per cent economic growth rate.
Marcus remains cautiously optimistic in spite of growing recession speculation and has suggested that South Africa’s economy would need to show contraction in the second quarter —as in the first —to raise concern.
She commented; ‘Given that the platinum strike covered more than two months of the first quarter, it is unlikely that a further contraction of that order of magnitude will occur in the second quarter. Therefore, we do not believe that a recession is the most likely outcome.’
Marcus has assured that other sectors have reported growth and that the mining halt was responsible for the contraction of 25 per cent in the first quarter.
However, South Africa’s economic growth was disappointing in 2013 at 1.9 per cent, and economists are currently predicting economic growth this year of 2.1 per cent.
However no resolution in the mining sector has been reached, and (as Marcus suggests) even if the mining strikes were settled the impact would take a long time to repair.
The Rand may fall victim to further downward spiralling despite Marcus’ optimism with fears for Friday’s credit reviews which will reveal manufacturing output statistics and credit ratings, possibly resulting in a credit downgrade.
The weakness in the Rand could help to boost the Pound.