Pound to South African Rand Exchange Rate Benefits from Brexit Speculation
Yesterday, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate advanced amid the latest rise in hopes for there to be optimistic Brexit developments soon. However, a slightly sturdier South African Rand (ZAR) limited the pair’s gains.
As concerns of slowing global growth dominated market movement last week, GBP/ZAR gained as the South African Rand is often correlated with risk-sentiment. GBP/ZAR climbed from 18.26 to 18.56 throughout the week.
This week so far, GBP/ZAR has seen further gains due largely to yesterday’s Pound (GBP) strength. Following a brief dip, GBP/ZAR sustained gains yesterday and at the time of writing was trending closer to the level of 18.64.
Due to claims that there had finally been progress in Britain’s cross-party Brexit talks, the Pound (GBP) was the biggest winner yesterday, but it may be in for losses in the coming days.
Pound (GBP) Exchange Rates Sustain Gains amid Hopes for Brexit Progress
While there has been a lack of solid development in the Brexit process since the formal Brexit date was delayed to the 31st of October, and UK political uncertainties have only risen, fresh speculation caused the Pound to jump yesterday.
Amid reports that cross-party negotiations between the government and opposition Labour Party were finally starting to take a more positive tone, the Pound’s appeal rose.
Investors bought Sterling due to hopes that an optimistic conclusion in cross-party talks could lead to a softer Brexit deal, one that could pass through Parliament.
However, the Pound’s outlook hasn’t exactly improved either. The latest Brexit speculation could prove to be a temporary boost if nothing comes of it.
Amid this and a lack of other factors supporting the Pound, the British currency’s outlook is limited.
South African Rand (ZAR) Exchange Rates Firm Following Week of Losses
While the South African Rand was hit by risk-off movement last week, the currency may not fall much farther.
Instead, some investors are opting to buy the currency back from its lows following the recent selloff as risk-correlated movement cools, and ahead of South Africa’s 2019 general election next week.
The South African Rand also steadied yesterday evening following the latest South African trade balance report, which beat expectations.
Overall though, shifts in global market sentiment towards risk and trade are the still the primary causes for the Rand’s movement. According to Bianca Botes from Peregrine Treasury Solutions:
‘Rather, the Rand’s movements have been determined by the prevailing global backdrop and risk-on/risk-off environment, and they are not a result of any particular anticipated outcome from elections’
Pound to South African Rand (GBP/ZAR) Exchange Rate Investors Anticipate Brexit Developments
The Pound to South African Rand (GBP/ZAR) exchange rate has advanced on hopes that there could be optimistic developments on Brexit soon. As a result, the pair could shed some recent gains if Brexit hopes are doused again.
If this week comes and goes without any solid news regarding cross-party Brexit talks, the Pound could shed some of its recent gains.
The South African Rand, on the other hand, could easily benefit from a Pound selloff if upcoming South African data beats expectations or if investors take more of a risk-on movement.
Thursday will see the publication of April’s South Africa manufacturing PMI from ABSA. As South African manufacturing has been weak lately, the Rand could get a boost if the data impresses investors.
Tomorrow’s Bank of England (BoE) policy decision and Friday’s UK services data could also influence GBP/ZAR movement, and Pound to South African Rand (GBP/ZAR exchange rate investors will be anticipating next Wednesday’s South African election as well.