GBP/ZAR Exchange Rate Sinks on UK’s Pre-Christmas General Election Fears
The Pound South African Rand (GBP/ZAR) exchange rate eased today, with the pairing currently trading around R18.849 as UK markets remain jittery as Prime Minister Boris Johnson’s cabinet remain split over a pre-Christmas election, further heightening Britain’s political uncertainties ahead of the October 31 Brexit deadline.
A Downing Street source also elevated fears of a General Election, which would further exacerbate Brexit-related jitters. The source said:
‘Any time that parliament gets a vote for delay, it will always choose delay. Therefore, if this parliament is unwilling to vote for a deal, we will have to go for a general election.’
We could see Sterling rise today however if the EU grants the UK with an extension to the Brexit deadline. As a result, the Pound has remained weak against the South African Rand due to a general sense of directionless as UK markets await a formal response from Brussels.
In UK ecostats, today saw the release of September’s BBA mortgage approvals figure which eased from 42.527 thousand to 42.310 thousand. Although with Brexit developments remaining in focus, this left the GBP/ZAR exchange rate relatively unmoved.
ZAR/GBP Exchange Rate Edges Higher as Risk-Appetite Returns on Improving US-China Relations
The South African Rand (ZAR) benefited from improving emerging market stocks thanks to improving sentiment regarding US-China trade negotiations.
Chinese Vice-Foreign Minister Le Yucheng buoyed market risk appetite after declaring that the two economic superpowers had made progress in trade talks.
Mr Le said:
‘As long as we respect each other and seek equal cooperation, there are no disagreements that cannot be resolved between China and the United States. What China wants is to deliver a better life for the Chinese people. We don’t want to take anything from anyone else. There’s no such thing as China replacing anyone or threatening anyone.’
With China being one of South Africa’s closest trading partners, this has boosted market confidence in the risk-sensitive South African Rand today.
Also, due to a flagging US economy, with the US construction giant Caterpillar announcing a marked drop in sales raising concern for a US economic downturn, traders sought out riskier assets like the ZAR.
GBP/ZAR Outlook: Brexit Developments to Remain in Driving Seat
Brexit developments will continue to drive GBP/ZAR movement for the rest of the week. Any announcement from the Conservative Government to go ahead with a General Election before Christmas could weigh on market confidence in Sterling, as this would further exacerbate uncertainties around Brexit.
South African Rand investors, meanwhile, will be paying close attention to global economic developments. If US-China relations improve over the next few days, we could see the ZAR/GBP exchange rate improve.