Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Benefits from Geopolitical Tensions
Rising geopolitical tensions helped to keep the Pound Sterling to South African Rand (GBP/ZAR) exchange rate on a positive footing as the earlier sense of market risk appetite faded.
With a US-China trade agreement looking unlikely to materialise in the near future, in spite of mooted progress, the appeal of the risk-sensitive South African Rand (ZAR) generally declined.
Escalating tensions between India and Pakistan also put pressure on ZAR exchange rates as investors piled into safe-haven assets, wary of relations between the two nations continuing to sour.
Although January’s South African private sector credit data showed an unexpectedly sharp increase on the month this failed to shore up the Rand on Thursday morning.
As confidence in the outlook of the South African economy remains generally muted markets saw little incentive to favour the Rand.
Fading Brexit Optimism Limits GBP/ZAR Exchange Rate Support
However, Pound Sterling (GBP) lost some of its bullishness as the recent bout of Brexit-based optimism faded.
While markets still see significantly reduced odds of a no-deal Brexit a major degree of uncertainty continues to hang over the domestic outlook.
With clarity over the UK’s future relationship with the EU looking set to remain elusive for some weeks yet the strength of GBP exchange rates naturally diminished.
Even though the latest GfK consumer confidence index showed a surprise improvement on the month this was not enough to shore up the GBP/ZAR exchange rate.
As the index remains firmly in negative territory this suggests that consumers remain wary ahead of the Brexit deadline, something which could potentially reflect in weaker retail sales data.
Manufacturing Sector Slowdown to Weigh on Pound Sterling (GBP)
Demand for the Pound could weaken further ahead of the weekend if the latest UK manufacturing PMI shows a fresh loss of momentum.
Signs that the UK manufacturing sector struggled to accelerate in February would expose GBP exchange rates to another bout of selling pressure.
Although the PMI is forecast to remain firmly above the neutral baseline of 50, reflecting continued expansion, this could still leave the Pound on a downtrend.
With signs already pointing towards a weaker first quarter gross domestic product any slowdown here would raise the risk of growth easing further.
Unless the UK economy demonstrates greater signs of resilience in the face of Brexit-based uncertainty the GBP/ZAR exchange rate looks set to come under increased pressure.
Speculation over Brexit is unlikely to offer the Pound any particular boost in the near future, barring any major breakthroughs.