GBP/ZAR Exchange Rate Muted Following BoE’s Brexit Warning
The Pound South African Rand (GBP/ZAR) exchange rate is edging lower this morning, as market digest the Bank of England’s (BoE) latest financial stability report.
At the time of writing the GBP/ZAR exchange rate is down almost 0.3% so far this morning, leaving the pairing trading close to a six-month at ZAR17.4493.
Pound (GBP) Mixed on FSR Release
Trade in the Pound (GBP) is mixed this morning, following the publication of the Bank of England’s financial stability report.
While GBP investors were relieved to hear that the BoE believes that the UK banking sector is strong enough to survive a hard Brexit, it warned that such an outcome would lead to increased volatility.
The bank warned:
‘Financial stability is not the same as market stability. Significant volatility and asset price changes are to be expected in a disorderly Brexit.’
The bank also warned that the risks of a no-deal Brexit have increased since the start of the year, further weighing on Sterling sentiment.
South African Rand (ZAR) Consolidates Gains as Fed Rate Cut Speculation Surges
Meanwhile, the South African Rand (ZAR) remains in a position of strength this morning after the currency was bolstered yesterday by renewed expectations of Federal Reserve rate cuts.
This follows remarks from Fed Chairman Jerome Powell yesterday in which he strongly hinted that the US central bank will cut rates later this month.
The speculation helped to give a leg up to the Rand as lower rates in the US will help to alleviate some of the pressure on South Africa’s struggling economy.
GBP/ZAR Exchange Rate Forecast: Will UK Political Uncertainty Continue to Cast a Shadow over Sterling?
Looking ahead, the recent downtrend in the Pound South African Rand (GBP/ZAR) exchange rate looks likely to persist for the foreseeable future as political uncertainty in the UK continues to darken Sterling sentiment.
This is mostly centred on the Conservative leadership race and how its outcome could influence Brexit, with GBP investors fearing that a likely Boris Johnson Premiership is likely to greatly increase the risk of a no-deal Brexit.
Meanwhile, any upside potential in the Rand may be limited somewhat by headwinds facing South Africa’s economy.
ZAR investors are growing increasingly concerns about the problems that continue to plague state utility Eskom, with analysts fearing its troubles will weigh on domestic growth and could even lead to a potential credit rating downgrade later in the year.