GBP/ZAR Exchange Rate Rangebound, Risk-On Appetite Improves South African Rand
The Pound South African Rand (GBP/ZAR) exchange rate held steady this morning, with the pairing currently trading around R19.082 after rising bets of a US Federal Reserve rate cut next month have benefited the risk-correlated South African currency.
Yesterday saw US industrial production sink from 0.8% to -0.4% in September, and further exacerbated fears of a slowdown for the world’s largest economy. As a result, this had traders flocking from the US Dollar safe-haven for riskier assets like the South African Rand.
Ian Shepherdson, Chief Economist at Pantheon Macroeconomics, commented:
‘In short, the industrial economy is struggling badly. Regional surveys make it clear that export-heavy parts of the country are faring worst, and we expect no change in that picture anytime soon. It’s just a matter of time before the sector starts to shed jobs. The near-term outlook for manufacturing output is grim, given the collapse in export orders.’
However, risk-appetite for the South African Rand was clipped after China’s growth figure plunged to its lowest level since 1992, exacerbating fears that this could have a knock-on effect on the SA economy. China is one of South Africa’s largest trading partners, so any signs of deteriorating in the world’s second-largest economy could weigh on market confidence in the Rand.
GBP/ZAR Exchange Rate Flat, Brexit Uncertainties Continue to Haunt UK Markets
The Pound (GBP) failed to gain against the South African Rand (ZAR) as Brexit developments remain in focus, with doubts continuing to mount against Prime Minister Boris Johnson’s proposal ahead of Saturday’s Parliamentary vote.
As a result, UK markets are remaining jittery on uncertainty surrounding the UK-EU Brexit deal today, despite the EU’s backing of an extension of Article 50 if Boris Johnson’s withdrawal agreement should be rejected on Saturday.
Angela Merkel, the German Chancellor, provided UK markets with the hope of an extension beyond the October 31 deadline, however, saying that it would be altogether unavoidable if British MPs rejected Boris Johnson’s deal.
Andrew Bridgen, Tory MP and leader of the European Research Group (ERG), however, added that the ERG would likely back Boris Johnson’s deal, saying:
‘I think the vast majority of the ERG will come to the conclusion that this deal is tolerable. What we don’t want is a second referendum.’
Sterling, as a result, has failed to gain today as Brexit uncertainty has continued to haunt UK markets.
GBP/ZAR Outlook: Sterling Could Soar if Boris Johnson Secures Majority on Brexit Deal Vote
Sterling traders will be looking ahead to next Tuesday’s release of September’s public sector net borrowing figure, which is expected to improve from £5.766 billion to £6.600 billion. However, Brexit developments are likely to continue driving the Pound next week.
South African Rand investors, meanwhile, will be looking ahead to next Wednesday’s release of South Africa’s inflation figure for September. Any signs of improvement could provide some much-needed uplift for the struggling economy.
The GBP/ZAR exchange rate could soar on Saturday if Boris Johnson manages to secure the Parliament’s majority for his Brexit deal. As a result, this would shelve no-deal fears and would see the UK leave the EU on October 31 with a UK-EU deal.