Pound to South African Rand Exchange Rate Gains Limited on Brexit Jitters
Despite persisting Brexit uncertainties, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has advanced further today as the South African Rand (ZAR) is weighed heavily by concerns about South Africa’s energy crisis.
Due to these lasting uncertainties over Eskom, South Africa’s state-owned power company, GBP/ZAR surged from 17.66 to 18.18 throughout the last week, gaining over half a cent.
Since markets opened on Monday, GBP/ZAR’s gains have only continued. GBP/ZAR touched on a month and a half high of 18.34 this morning and trended near that level at the time of writing.
The Pound’s (GBP) gains versus the South African Rand would likely have been even stronger if not for persisting uncertainties regarding the Brexit process and how it will unfold over the coming month.
Pound (GBP) Exchange Rates Weighed by Political Uncertainties
Last week’s UK Parliament debate on Brexit ended with the government’s negotiation not finding enough support to really call it a ‘mandate’.
As a result, the government has returned to Brexit talks with Brussels without the strong backing it arguably needed to get any kind of wiggle room from EU negotiators.
The EU has continued to indicate that it will not change its stance on Brexit, and analysts do not expect the fresh round of talks to be productive.
With only around 40 days to Brexit, this has worsened No-deal Brexit fears and left the Pound weaker.
Political jitters only worsened on Monday, as 7 members from the opposition Labour Party resigned from the party in protest of the party’s stance over Brexit, as well as other controversies.
This news worsened concerns that UK political factions could fracture further, worsening political uncertainties and keeping the possibility of a worst-case scenario No-deal Brexit alive. This kept pressure on Sterling and limited its gains.
South African Rand (ZAR) Exchange Rate Slump Continues amid Eskom Crisis
Despite rising hopes that the US and China will be able to reach some kind of deal on trade soon, the risky South African Rand has been unable to benefit from this news.
Investors have been more willing to take risks over the past week, but the South African Rand has been throttled by domestic concerns as Eskom, South Africa’s state-owned power company, faces an energy crisis.
The Rand has been tumbling since last week, when Eskom resumed major power-cuts across South Africa.
Investors are anxious ahead of a budget speech from South Africa Finance Minister Tito Mboweni on Wednesday, during which he is expected to announce a bailout for Eskom. This is keeping the Rand under further pressure.
Analysts at Continuum Economics in London said ‘We think that the currency will remain vulnerable in the next few days,’
Pound to South African Rand (GBP/ZAR) Exchange Rate Investors Anticipate Political Developments
The Pound to South African Rand exchange rate has the potential to keep climbing this week, even as Brexit jitters weigh on Sterling.
Key South African data, as well as an expected speech from South Africa Finance Minister Tito Mboweni on Wednesday, could influence the South African Rand in the coming days.
If South African inflation on Wednesday comes in higher than expected or Finance Minister Mboweni impresses investors with his bailout plan for Eskom, the South African Rand could find some relief and push GBP/ZAR lower again.
Surprising South African inflation could influence South African Reserve Bank (SARB) interest rate hike bets.
Meanwhile, Pound investors remain highly anxious about the Brexit process.
With just around 40 days until Brexit, developments over the coming days and weeks could be significant for the Pound outlook if an outcome to Brexit finally comes into sight.
UK data due later in the week, such as public sector borrowing and CBI’s distributive trades stats, could also influence the Pound to South African Rand (GBP/ZAR) exchange rate.