GBP/ZAR Exchange Rate Rangebound, Election Uncertainty Holds back Sterling
The Pound South African Rand (GBP/ZAR) exchange rate held steady today, with the pairing currently trading around R19.174 after the Survation opinion poll for Good Morning Britain suggested a secure majority win for the Conservative Party after Thursday’s general election.
The poll showed a 14-percentage point lead for the Tories over the Labour Party, buoying confidence in the Pound as markets now anticipate a win for Prime Minister Boris Johnson.
Markets tend to favour a Conservative win in the general election due to their promise resolve Brexit uncertainty by 31st January.
Elsa Lignos, Global Head of Strategy at RBC Markets, recommended caution, however, saying:
‘[T]here is a historically high number of undecided voters which could affect as many as 80 marginal seats. We will be neutral GBP going into Thursday and look to trade the outcome.’
Sterling investors are also remaining cautious with the outcome of a hung parliament continuing to remain a possibility, despite the polls’ suggestions.
ZAR/GBP Exchange Rate Steady, US-China Trade Uncertainty Weighs on South African Rand
The risk-sensitive South African Rand (ZAR) failed to gain on the Pound today as risk-appetite for the South African currency dwindles on heightened uncertainty around US-China trade relations.
Today also saw China’s exports fall sharply in November, further adding to concerns over the effects of the trade war on the global economy.
Comments from Larry Kudlow, the White House Economic Adviser, also exacerbated fears of a flare-up between the two superpowers, after he indicated the 15th December deadline in which Washington could impose a new round of tariffs on $156 billion worth of Chinese exports.
With China being South Africa’s largest trading partner, this has weighed on market confidence in the flagging South African economy and has further weakened the value of ZAR.
Jeffrey Halley, the Senior Market Analyst at OANDA, commented:
‘China is clearly not immune to either the U.S. trade tariffs, or the lingering slowdown in the broader global economy.’
GBP/ZAR Outlook: Could Sterling Rise on Improving UK Growth in October?
We could see the Pound rise against the South African Rand tomorrow if the UK growth figure for October confirms forecasts and rises from -0.1% to 0.1%.
Tomorrow will also see the release of the UK manufacturing and industrial production figures for October, with any indications of improving further bolstering optimism in the British economy.
US-China trade developments, meanwhile, will continue to drive the ZAR/GBP exchange rate, with any signs of relations between the two superpowers deteriorating limiting the South African Rand.
UK political developments will remain in focus ahead of Thursday’s general election, so we can expect the Pound to remain volatile as the tensions between the major parties are expected to intensify ahead of the vote.