Pound to South African Rand Exchange Rate Higher Despite US-China Hopes
After briefly slumping on Monday due to Brexit fears and stronger demand for risky emerging market currencies, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate recovered most of those losses on Tuesday.
Limited market demand for risky emerging market currencies like the South African Rand (ZAR) made it easier for GBP/ZAR to climb from 18.54 to 18.64 last week, but on Monday risk-sentiment improved again slightly.
This pushed GBP/ZAR lower to around the level of 18.46, but the pair quickly recovered and trended nearer the week’s opening levels again on Tuesday as Brexit speculation and UK data supported the Pound (GBP).
While Brexit speculation hasn’t been as bullish for the Pound as it was earlier in November, it has helped the British currency to rebound today despite the South African Rand also seeing decent support.
Pound (GBP) Exchange Rates Supported by Brexit Hopes and UK Data
Sterling was highly volatile for most of Monday’s session, as markets digested numerous reports and speculations regarding current issues facing the Brexit process.
Concerns worsened that the UK Parliament would not agree to a UK-EU Brexit agreement, or that the UK and EU would fail to reach an agreement by the end of November.
However, separate reports on Monday and Tuesday indicated that the UK and EU were in the final stretches of a deal. Some analysts even suggested that a deal may be on track to be reached within the next few sessions.
UK Prime Minister Theresa May’s Deputy, David Lidington, said on Tuesday that an agreement was ‘almost within touching distance’.
He said a deal could still be reached within the next 48 hours, though disagreement remained over how to handle the issue of Ireland’s border.
Britain’s latest wage stats gave the Pound an additional boost on Tuesday, as the figure excluding bonuses beat forecasts and came in at 3.2%. According to Geraint Johnes from Lancaster University Management School, the UK job report was generally optimistic overall:
‘Underemployment, taking the form of people working fewer hours than they would like and working in less secure circumstances than they would like, has been a problem in recent years, but seems now to be in decline.’
South African Rand (ZAR) Avoids Losses amid US-China Trade Hopes
Risky, emerging market currencies like the South African Rand (ZAR) have seen mixed movement over the past week due to major political uncertainties and developments in the US and Eurozone.
US Mid-Term Elections briefly caused markets to bet that US fiscal or monetary policy may be impacted by the US Republican Party losing control of the House of Congress. This led to a brief risk-on rally that boosted ZAR.
However, as the Federal Reserve maintained its hawkish stance on US monetary policy the US Dollar (USD) recovered and risk-sentiment slipped. This ultimately helped GBP/ZAR to climb last week.
This week so far, the South African Rand has seen stronger performance as the US and China have restarted trade negotiations.
Hopes that the US and China will be able to negotiate some kind of solution to ongoing trade tensions and escalations made investors more willing to take risks.
This helped the South African Rand to avoid further losses against the Pound on Tuesday.
Pound to South African Rand (GBP/ZAR) Exchange Rate Investors Await Brexit News and South African Retail Sales
With Brexit speculation enough to cause a shift in the volatile Pound’s movement this week, the Pound to South African Rand (GBP/ZAR) exchange rate is likely to remain highly vulnerable to Brexit developments in the coming sessions.
Pound investors will be watching carefully for any developments in UK-EU Brexit negotiations.
If a Brexit deal is met in the next two days the Pound will surge on hopes for the deal to be formally agreed at an emergency summit before the end of the month.
However, if no deal is met or other concerns worsen the perceived chance of UK Prime Minister Theresa May’s Brexit plan succeeding, the Pound could slump again instead.
Upcoming data may influence the Pound slightly if there are no major Brexit developments dominating movement. UK inflation data from October will be published on Wednesday.
As for the South African Rand, it will remain sensitive to shifts in market risk sentiment and demand for emerging market currencies.
Pound to South African Rand (GBP/ZAR) exchange rate investors may also react to September’s South African retail sales results, due on Wednesday.