Hopes of Brexit Progress Shore up Pound Sterling South African Rand (GBP/ZAR) Exchange Rate
Positive comments from European Commission President Jean-Claude Juncker helped to push the Pound Sterling to South African Rand (GBP/ZAR) exchange rate higher ahead of the weekend.
As Juncker insisted that it is still possible to get a deal on Brexit this encouraged investors to pile back into Pound Sterling (GBP) on Friday morning.
Although progress on the Irish border issue has proved decidedly lacking, with little over a month now left before the Brexit deadline, GBP exchange rates still rallied on the back of the comments.
Even so, this bullishness could ultimately prove short-lived if the two sides fail to show any signs of moving closer to a mutually agreeable deal in the days ahead.
With the Bank of England (BoE) also adopting a more cautious outlook the downside potential for the GBP/ZAR exchange rate remains.
Lack of SARB Action Fails to Support South African Rand (ZAR) Demand
In spite of the South African Reserve Bank’s (SARB) decision to leave interest rates on hold the mood towards the South African Rand (ZAR) soured.
As SARB Governor Lesetja Kganyago highlighted the difficulties facing the domestic economy this left ZAR exchange rates on the back foot.
With the central bank lowering its 2020 growth forecast from 1.8% to 1.5% markets saw little cause for confidence in the Rand.
Heightened global trade tensions could keep the South African Rand under pressure in the coming week as investors eye developments in the Middle East.
If relations between the US and Iran continue to sour an increased sense of anxiety may drag the Rand lower across the board.
Weakening Industrial Orders Forecast to Drag on GBP/ZAR Exchange Rate
The GBP/ZAR exchange rate could falter on Monday, meanwhile, as forecasts point towards another monthly decline in the CBI industrial trends orders index.
With the index expected to slide from -13 to -23 in September confidence in the underlying health of the UK economy looks set to diminish further.
As the manufacturing sector has remained in a state of contraction in recent months any fresh signs of a slowdown are likely to weigh heavily on demand for the Pound.
Given the BoE’s increasingly cautious outlook evidence of a slowing domestic economy look set to increase the risk of interest rates seeing a cut in the months ahead.
Unless industrial orders show signs of improvement at the end of the third quarter GBP exchange rates could return to a weaker footing at the start of the new week.
The appeal of the Pound could also diminish in response to any fresh political developments as anxiety over the approaching Brexit deadline continues to mount.