GBP/ZAR Exchange Rate Improves, UK Politics in Brexit Deadlock
The Pound South African Rand (GBP/ZAR) exchange rate edged higher, with the pairing currently trading around R18.569 after Parliament reconvened yesterday and Prime Minister Boris Johnson reiterated insistence on leaving the EU by October 31.
However, Sterling lost most of its gains following the UK Supreme Court’s ruling of an unlawful suspension, as political developments remain in a state of deadlock amid increasing calls from the Conservative Government for an early general election.
Boris Johnson lashed out against his opposition after his return from the UN summit, saying:
‘Instead of facing the voters the opposition turned tail and fled from an election. Instead of deciding to let the voters decide, they ran for the courts … it is absolutely no disrespect to the judiciary to say I think the court was wrong.’
As a result, Sterling has managed to gain on the weak South African Rand, despite being subdued against many of its larger competitors like the Euro and the US Dollar.
In UK economic news, today will see Sir Jon Cunliffee, Deputy Governor for Financial Stability at the Bank of England (BoE), deliver a speech. Any indications of a dovish outlook for the UK’s economy in the near term could weigh on the GBP/ZAR exchange rate.
ZAR/GBP Exchange Rate Eases as US-China Trade Tensions Weigh on Risk Appetite
The South African Rand (ZAR) has continued to struggle from dampened global market sentiment after US-China trade tensions have once again increased. This came following comments from Wang Yi, China’s State Councillor and Foreign Minister, who said:
‘China-U.S. relations today have once again come to a crossroad. While China opens wider to the U.S. and the rest of the world, we expect the U.S. to do the same to China and remove all unreasonable restrictions. In a word, China’s efforts and achievements of reform and opening up in the past several decades have been widely recognized. They should not be deliberately ignored or denied.’
With China being one of South Africa’s largest trading partners, this has weighed on market sentiment in the struggling SA economy.
Meanwhile, today will see the publication of August’s South African producer price index.
The month-on-month figure is expected to increase by 0.2%, while yearly it is forecast to improve by 5.4%. As a result, we could see ZAR claw back some of its losses on renewed optimism in the economy.
GBP/ZAR Outlook: Sterling to Remain Volatile on UK Political Uncertainties
Pound traders will be looking ahead to tomorrow’s release of September’s GfK consumer confidence figure. As the figure is expected to hold at -14, this could prove Pound-negative.
Meanwhile, South African Rand traders will be paying close attention to US-China trade developments. Any further indications of a flare-up between the two superpowers could further weaken the risk-sensitive ZAR.
The GBP/ZAR exchange rate will likely remain volatile this week, as Parliament continues to remain divided as the October 31 Brexit deadline looms ever nearer.