Pound to South African Rand Exchange Rate Slides Again as Rand Rises
Factors including stronger UK retail sales stats and efforts for Parliament to prevent a no-deal Brexit helped the Pound Sterling to South African Rand (GBP/ZAR) exchange rate to rebound from the lows seen earlier in the week, but its recovery has been stopped short.
Since opening this week at the level of 17.55, GBP/ZAR has seen notable losses and even briefly touched its worst level in over a year, 17.22, on Tuesday.
In the middle of the week, the Pound (GBP) mounted a recovery. However, following the South African Reserve Bank’s (SARB) policy decision yesterday GBP/ZAR slipped again.
At the time of writing on Friday morning, GBP/ZAR was trending closer to the level of 17.31 – still well below the week’s opening levels.
Investors remain hesitant to buy the Brexit-battered Pound too much, and the South African Rand (ZAR) has been supported by recent Central Bank news.
Pound (GBP) Exchange Rates Kept from Worst Levels by Attempts to Block No-Deal Brexit
After being throttled by fears of a no-deal Brexit for most of the week, the Pound finally found a little sturdier support during Thursday’s session.
Investors bought the British currency back from its cheapest levels in profit-taking, but Sterling also found support in the form of the day’s stronger than expected UK retail sales stats, as well as the day’s domestic political developments.
Amid concerns that Britain’s next Prime Minister could attempt to close Parliament and force through a no-deal Brexit, MPs voted on measures that could prevent this.
Signs that Parliament would still attempt to block a no-deal Brexit from becoming reality have kept investors from selling the Pound to new yearly lows, but the British currency remains unappealing overall.
With Brexiteer Boris Johnson seen as a shoo-in to become the next Prime Minister in the coming weeks, no-deal Brexit jitters persist and keep a cap on the Pound’s potential for recovery.
South African Rand (ZAR) Exchange Rates Strengthen as South African Reserve Bank (SARB) Cuts Rates
In a move that was broadly welcomed by markets, the South African Reserve Bank (SARB) cut South Africa’s interest rates during its July policy decision yesterday.
As was expected, the bank cut rates from 6.75% to 6.50%.
While currencies typically fall in reaction to domestic interest rate cuts, hopes that it would bolster South Africa’s economy, as well as the dovishness of other major Central Banks, offset any reason to sell the Rand.
On top of this, some analysts had been speculating a more aggressive easing stance from the SARB. As a result, the news ultimately supported the Rand and helped it to prevent further GBP/ZAR gains.
Economists also noted that the cut was likely to be welcomed by consumers. According to Jacques Celliers, Chief Executive at FNB:
‘Today’s rate cut is expected to bring some relief to consumers who have been under pressure during the last few months’
Pound to South African Rand (GBP/ZAR) Exchange Rate to be driven by UK Politics
The Pound to South African Rand (GBP/ZAR) exchange rate is on track to close the week lower, as hopes for a no-deal Brexit to be prevented have done little to distinguish overall no-deal Brexit fears weighing heavily on Sterling.
With Brextieer Boris Johnson likely to win the Conservative Party leadership contest and be confirmed as Britain’s next Prime Minister in the coming weeks, the focus is likely to remain on politics for Pound investors.
This is especially true as next week’s UK data is unlikely to be particularly influential for the Pound outlook.
Save for some business data on Monday, Britain’s economic calendar is looking relatively quiet until the end of the month.
GBP/ZAR investors are more likely to react to South Africa’s upcoming ecostats, including key inflation rate data due on Wednesday.
Overall though, developments in politics, including geopolitics like trade tensions, are likely to be among the biggest influences for the Pound to South African Rand (GBP/ZAR) exchange rate next week.