Solid UK House Price Growth Fails to Boost Pound South African Rand (GBP/ZAR) Exchange Rate
Another solid month of growth in UK house prices was not enough to shore up the Pound Sterling to South African Rand (GBP/ZAR) exchange rate.
While prices saw growth of 1.6% on the month in September growing doubts over the sustainability of the housing market’s strength limited the potential for Pound Sterling (GBP) gains.
As the build-up in demand that occurred over the course of the lockdown starts to fade house prices look set to come under pressure once again.
Lingering doubts over the issue of Brexit could equally send the housing market into reverse in the months ahead, keeping GBP exchange rates on a softer footing at this juncture.
Easing Market Jitters Benefit South African Rand
A temporary lull in market risk aversion helped to shore up the South African Rand (ZAR), meanwhile, in spite of the latest political tensions in the US.
Although the White House pulled the plug on negotiations for a potential fiscal stimulus package this was not enough to dent the appeal of risk-sensitive assets.
With the US Dollar (USD) on the back foot the Rand instead found renewed support as investors were encouraged to pile into higher-yielding assets instead.
The mood towards the Rand could improve further on Friday if the SACCI business confidence index shows an uptick on the month.
Signs that business sentiment is recovering from the impact of the Covid-19 pandemic may see ZAR exchange rates trending higher across the board.
While the South African economy still appears to face significant negative headwinds in the coming months evidence of greater business optimism could still shore up the Rand in the short term.
However, any fresh deterioration in market risk appetite could easily drag on ZAR exchange rates as confidence in the global economy outlook remains fragile.
UK Trade and GDP Data Set to Drive GBP/ZAR Exchange Rate Volatility
The GBP/ZAR exchange rate looks set to experience further volatility on the back of the latest raft of UK trade and growth data.
With forecasts pointing towards a narrowing of the trade surplus in August the mood towards the Pound could sour ahead of the weekend.
As a significant degree of uncertainty continues to hang over the UK’s future trade relationships any signs of weakness here could stoke market jitters.
On the other hand, with August’s monthly gross domestic product expected to show another solid uptick the potential for fresh GBP/ZAR exchange rate gains remains.
As long as the economy shows signs of remaining on track to deliver a stronger performance in the third quarter this should limit the downside potential of the Pound.
Even so, if growth appears to lose some of its initial bout of recovery momentum on the month this may put a dampener on GBP exchange rates.