GBP/ZAR Exchange Rate Rebounds from Weekly Lows
The Pound South African Rand (GBP/ZAR) exchange rate is trending higher this morning as fading risk appetite and Eskom’s woes weigh on ZAR sentiment.
At the time of writing the GBP/ZAR exchange rate is currently trading at around ZAR19.2585, up around 0.5% from this morning’s opening levels.
South African Rand (ZAR) Slumps as Risk Relief Rally Stalls
After trending higher in the mid-week on reports of a ‘significant breakthrough’ in the development of a coronavirus vaccine, the South African Rand (ZAR) has begun to relinquish its gains this morning.
This comes in part due to the World Health Organization (WHO) playing down the reports regarding the vaccine, clarifying there are currently ‘no known effective therapeutics’.
Experts also warn it will be months before any vaccine has made it through testing and is ready to be given to the public.
Further limiting the appeal of the Rand this morning are ongoing concerns over state power utility Eskom.
Eskom announced on Wednesday that load shedding would remain in place until at least Friday, with the rolling power cuts possibility extending to the weekend as well.
The cash-strapped utility continues to struggle to meet South Africa’s power demands following the malfunction of a number of it generation units last month.
The frequent power cuts have put significant pressure on the Rand so far in 2020 as ZAR investors fear they leave South Africa’s economy on the brink of recession.
Upside in the Pound (GBP) Capped by Brexit Jitters
Whilst it is rallying against the South African Rand (ZAR) this morning, the Pound (GBP) is struggling in wider trade as Sterling sentiment is undermined by ongoing Brexit uncertainty.
Fears that the UK could face a no-deal Brexit at the end of 2020 have been reignited this week following a bullish speech from Boris Johnson on Monday.
Speaking in London, Johnson called for a Canada-style free trade agreement (FTA) between the UK and EU, stating that the UK should not accept EU rules anymore that the EU should accept UK rules after Brexit.
Johnson as warned that he would be prepared to walk away from negotiations and revert to World Trade Organization (WTO) terms if he can’t secure the deal he wants.
Given the EU has repeated stated that any FTA would be dependent on alignment with EU rules, GBP investors fear the two sides are on a collision course which will ultimately see the UK face a cliff-edge Brexit in December.