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Pound to South African Rand Exchange Rate Avoids Losses on Hopes that ‘No Deal Brexit’ Will Be Avoided

Pound to South African Rand Exchange Rate Rebounds Slightly from Worst Levels

The Pound to South African Rand (GBP/ZAR) exchange rate has avoided trending near its worst levels today, despite US-China trade hopes bolstering demand for the risky South African Rand (ZAR). The Pound (GBP) is stronger due to the latest Brexit hopes.

Last week, a weaker US Dollar (USD) combined with US-China trade hopes left the South African Rand much stronger, and GBP/ZAR tumbled from 18.38 to 17.79 throughout the week.

This week so far, GBP/ZAR has fluctuated but has largely trended below the week’s opening levels. This morning, GBP/ZAR briefly touched on a one-month-low of 17.67 before rebounding slightly and trending closer to the week’s opening levels at the time of writing.

Demand for the Pound has been limited this week so far, as the UK debate on UK Prime Minister Theresa May’s Brexit deal resumes and next week’s vote on the deal remains highly anticipated.

Some optimistic developments in the market’s Brexit outlook have helped the Pound to hold above its worst levels. Still, market hopes for a US-China trade deal are keeping the risky emerging market currencies like the Rand strong too.

Pound (GBP) Exchange Rates Bolstered by Amendment to Block ‘No-Deal Brexit’

UK Parliament has reconvened this week after its winter recess, and the key issues surrounding the Brexit process and how it will unfold in the coming months immediately took focus.

On Tuesday, Parliament voted on an amendment to the Finance Bill, tabled by a cross-party group of senior ministers from the Conservative and Labour Parties.

The amendment would limit the scope for the UK government to make tax changes in the event of a ‘no-deal Brexit’ unless authorised by MPs. The amendment was tabled in an effort to stop a ‘no-deal Brexit’ from happening.

A ‘no-deal Brexit’ is widely considered to be the worst-case scenario outcome for Brexit.

In the end, the amendment succeeded, with 20 Conservative Party members defying the party position and voting for the amendment.

The amendment bolstered hopes that a ‘no-deal Brexit’ could be avoided, but ultimately had little impact on the Brexit outlook. This is because the government is perceived as having other funding options in the potential event of a ‘no-deal Brexit’.

As a result, the Pound failed to capitalise on the news and only saw a limited recovery versus a relatively sturdy South African Rand.

South African Rand (ZAR) Exchange Rates Avoid Further Losses on South African Manufacturing Rise

The Pound to South African Rand (GBP/ZAR) exchange rate may have seen stronger gains on Wednesday morning if South Africa’s latest ecostats had fallen short of expectations.

On Wednesday morning, ABSA posted its South African manufacturing PMI from December, which edged higher from 49.5 to 50.7 – putting it just above the 50 mark point separating growth from contraction.

The data reassured investors, amid some concerns that South African manufacturing could fall even lower.

Its impact on the South African Rand was also limited though, with markets hoping for stronger manufacturing in the coming months. According to the Bureau for Economic Research, which conducts the survey:

‘While the December survey results are encouraging, a sustained recovery in demand is required before a meaningful recovery in manufacturing output, investment and employment can take place,’

Hopes for US-China trade developments are also bolstering demand for risky emerging market currencies like the South African Rand.

Pound to South African Rand (GBP/ZAR) Exchange Rate Investors Await Political Developments

The Pound to South African Rand (GBP/ZAR) exchange rate’s movements are likely to remain limited, as investors anticipate developments in the Brexit process and in global risk-sentiment.

With UK Prime Minister Theresa May’s Brexit deal returning to debate today and the vote on the deal expected next Tuesday, Pound investors are highly anticipating potential Brexit developments.

Any further signs that a ‘no-deal Brexit’ can be avoided, or that UK Prime Minister Theresa May’s soft Brexit deal is coming closer to succeeding, could bolster Sterling.

The South African Rand, on the other hand, could see stronger performance if there are optimistic US-China trade developments.

As the South African Rand is a risky emerging market currency, it performs strongly when investors are more confident in global trade.

Data due in the coming days could influence GBP/ZAR slightly too.

Pound to South African Rand (GBP/ZAR) exchange rate movement could be driven slightly by South African manufacturing production data tomorrow, as well as UK growth and production data on Friday.