GBP/ZAR Exchange Rate Rangebound, Could Sterling Rise on EU Acceptance of Irish Backstop Compromise?
The Pound South African Rand (GBP/ZAR) exchange rate held steady this morning, with the pairing currently trading around R18.873 after Prime Minister Boris Johnson struck a compromise with the Democratic Unionist Party (DUP) with a Belfast-Dublin ‘bilateral lock’ – a post-Brexit Irish backstop compromise deal.
As a result, Sterling steadied against the South African currency now that Boris Johnson begins to set out the details of a ‘final’ Brexit offer to the European Union, with UK markets becoming increasingly hopeful that this could break the deadlock ahead of the October 31 deadline.
Simon Covenney, Irish Foreign Minister, was sceptical, however, saying:
‘Certainly, from what we’re reading this morning, I would not be too encouraged by it. Essentially if [Boris Johnson] is proposing customs checks on the island of Ireland, then I don’t think that is going to be the basis of an agreement. But let’s wait and see the detail of that before we make a full judgment on it.’
In UK economic news, today saw the UK’s Markit Construction PMI for September sink deeper into contraction territory from 45 to 43.3
Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, was downbeat in his assessment:
‘Looking ahead the signs do not look positive. Even a moderation in input prices since March 2019 and some moderate improvement in supply chain pressures will not be enough to keep the wolf from the door as no-deal looms and businesses remain Brexit unsteady.’
ZAR/GBP Exchange Rate Flat, South Africa’s Economy Continues on Downwards Spiral
The South African Rand (ZAR) held steady against the Pound as South Africa’s economy continues its downward spiral with Financial Minister Tito Mboweni’s fiscal plan yet to receive any feedback from the South African government.
South African President Cyril Ramaphosa, however, was mixed in his weekly message, saying:
‘Much of the confidence that the country had 20 months ago has dissipated as the reality of the problems we face became clearer. I am certain that with the active involvement of all sectors of society, this will be achieved.’
Meanwhile, US-China trade uncertainty continues to weigh on the risk-sensitive South African Rand, and with China’s recent economic downturn, this has also left ZAR trader’s feeling jittery with China being one of South Africa’s largest trading partners.
GBP/ZAR Outlook: Could Sterling Rise on Brexit Breakthrough?
Sterling traders will be looking ahead to tomorrow’s release of September’s Markit services PMI, which expected to ease slightly from 50.6 to 50.3.
Tomorrow will also see Silvana Tenreyro, a member of the Bank of England’s Monetary Policy Committee, deliver a speech. Any dovish comments about the UK economy could begin to weigh on market confidence in the Pound.
Meanwhile, South African markets will be paying close attention to US-China trade developments.
The GBP/ZAR exchange rate could edge higher if Boris Johnson succeeds in breaking the Brexit deadlock with the EU with his new and ‘final’ withdrawal deal offer ahead of the October deadline.