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Pound South African Rand Exchange Rate Outlook: Could Sterling Sink as Tories Lose Ground in Opinion Polls?

GBP/ZAR Exchange Rate Rangebound, Labour Climbs Opinion Polls

The Pound South African Rand (GBP/ZAR) exchange rate held steady today, with the pairing currently trading around R19.021 after opinion polls show that the Conservatives have begun to lose some ground to the Labour Party.

With markets generally preferring a Conservative government, due to their enterprise-friendly policies and clearer stance on Brexit, UK markets have remained cautious today.

The GBP/ZAR exchange rate has remained steady with investors now becoming increasingly concerned over the prospect of a hung parliament after the 12th December general election.

 Bill Diviney, Senior Economist at ABN AMRO commented:

‘Labour would have much more freedom to implement its radical leftwing agenda, including renationalising parts of the economy that had been privatised (such as the railways), and immediately raising the minimum wage by over 20%.

‘This would likely have a negative impact on financial markets and business confidence.’

South African Rand to Pound Exchange Rate Steady on US-China Trade Deal Hopes

The South African Rand (ZAR) steadied against Sterling in spite of the International Monetary Fund’s (IMF) warning that South Africa could face worsening fiscal position.

The IMF warned about Eskom, South Africa’s electricity public utility, which has continued to drag on the fragile economy. The IMF stated:

‘[South Africa’s] economic growth continues to deteriorate. The country’s largest economic risk is Eskom. Government has announced a comprehensive set of structural reforms to support the energy sector and more specifically, Eskom.’

Analysts have commented on the South African Rands’ resiliency down to the attractive yield and high-interest rates after the South African Central Bank (SARB) held on to its interest rates last week despite flagging inflation.

The risk-sensitive ZAR has continued to benefit from rising market optimism over a US-China trade deal, with investors seeking out riskier assets as the two superpowers look increasingly set to settle on a ‘phase one’ deal by the end of the year.

Gao Lingyun, an Analyst at the Chinese Academy of Social Sciences, Beijing, commented:

‘The two sides have basically reached broad consensus for the phase one agreement.’

GBP/ZAR Outlook: UK Political Developments in Spotlight

South African Rand (ZAR) investors will be looking ahead to Thursday’s publication of the South African PPI figure for October, which is expected to rise from 0.2% to 0.35% on the month.

US-China trade developments will remain in focus this week.

Any signs of the world’s two largest economies securing a ‘phase one’ trade deal in the near-term could boost the risk-averse South African Rand.

Meanwhile, Sterling traders will be awaiting Friday’s release of November’s GfK consumer confidence figure, which is expected to remain subdued at -14.

However, UK political developments will continue to drive the GBP/ZAR exchange rate this week, with any signs of the Labour Party furthering their lead on the Conservatives likely to weigh on market confidence in the Pound.