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Pound to South African Rand Exchange Rate Returns to Weekly Best as Outlook Awaits Political Developments

Pound to South African Rand Exchange Rate Jumps on Market Risk-Aversion

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is benefitting from market risk-aversion today. However, amid uncertainties over how the Brexit process will unfold, the Pound’s (GBP) gains are limited.

Last week saw GBP/ZAR gain as Sterling climbed against a jittery South African Rand (ZAR). GBP/ZAR advanced from 21.40 to 21.48 throughout the week.

GBP/ZAR has remained highly volatile this week. In the middle of the week, GBP/ZAR touched on a low of 21.25, but since then the pair has rebounded strongly.

At the time of writing on Thursday, GBP/ZAR is trending near a weekly high of 21.64.

Markets are eagerly awaiting Brexit and South African economic recovery news, which could influence the outlooks of both currencies today.

Pound (GBP) Exchange Rate Outlook Limited by Brexit Uncertainty

The Pound has been benefitting from weakness in rival currencies this week. However, Britain’s domestic outlook is not particularly positive, and uncertainty over how the Brexit process could unfold is limiting the British currency’s appeal.

Today is a long-awaited deadline of sorts in UK-EU Brexit negotiations. While the deadline was a suggestion rather than a hard deadline, there is still speculation that the UK government could walk away from talks today.

According to Justin Onuekwusi, Portfolio Manager at Legal & General Investment Management:

‘On Brexit, we have seen negotiations with the EU go down to the wire. But the original deadline of 15 October looks difficult and we may see that postponed to end-October/early November. The next few weeks will be crucial,’

South African Rand (ZAR) Exchange Rates Weak as Markets Await Government Recovery Plan

The South African Rand is a currency often correlated to trade and emerging market sentiment.

As market sentiment has taken a hit from this week’s US political and coronavirus news, investors are avoiding risks. This has left the South African Rand much weaker in recent sessions.

This has been the primary cause of ZAR losses this week. However, the South African Rand’s appeal is also limited as investors are awaiting information on the South African government’s coronavirus recovery plan.

South Africa President Cyril Ramaphosa will be unveiling more details of the recovery plan later today.

According to a note from ETM Analytics:

‘While global dynamics continue to drive the rand’s short-term movements, domestic developments in the next few weeks, starting today, are likely to determine its long-term path,

Investors will be watching the president’s address very closely, looking not only for fiscally responsible growth-enhancing reforms, but for credible fiscally responsible growth-enhancing reforms.’

Pound to South African Rand (GBP/ZAR) Exchange Rate to React to Political Developments

Reaction to the UK government’s Brexit plans and South Africa’s latest economic recovery plans are likely to influence GBP/ZAR movement towards the end of the week.

These developments could also influence forex market outlooks overall.

If the UK government does agree to continue Brexit negotiation as expected, the Pound will find it easier to sustain gains.

On the other hand, the Pound would plummet if the UK government does walk away from negotiations, though this is seen as unlikely.

The South African Rand is more likely to be resilient towards the end of the week if investors are impressed with the South African government’s recovery plans.

However, with the global coronavirus second wave worsening, the Pound to South African Rand (GBP/ZAR) exchange rate could remain high if the Rand remains under pressure on market risk-aversion.