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South African Inflation Fails to Prevent Pound to South African Rand Exchange Rate Bounce

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Pound to South African Rand Exchange Rate Climbs from Worst Levels ahead of New UK Government

Following weeks of rising no-deal Brexit fears and a falling Pound Sterling to South African Rand (GBP/ZAR) exchange rate, the pair rebounded slightly today. This is despite the outlook for the Pound (GBP) remaining dominated with political uncertainties and Brexit fears.

GBP/ZAR has seen weeks of consecutive losses, and fell from 17.55 to 17.42 last week.

This week could see another week of losses for GBP/ZAR. Though the pair has recovered from the week’s low of 17.24, it still trends below the week’s opening levels at around 17.38 at the time of writing.

Further weakness may lie ahead for the Pound to South African Rand exchange rate, as no-deal Brexit fears dominate the Sterling outlook. For now though, the latest South African inflation data has not helped the South African Rand (ZAR) to hold its best levels.

Pound (GBP) Exchange Rates Rebound in Brief Relief Rally

Despite Brexit uncertainty and no-deal Brexit fears dominating the outlooks for Sterling and Britain’s economy, the Pound saw a solid rebound in demand today.

Investors bought the British currency from its cheapest levels in a bout of profit taking following weeks of bearish losses after Boris Johnson was announced as Britain’s next Prime Minister.

This was partially due to relief that the Conservative Party leadership contest had come to an end and political and Brexit developments could soon start up again.

Economists speculate that the chances of a worst-case scenario no-deal Brexit will worsen under a Boris Johnson government though, so the Pound’s rebound is expected to be temporary.

South African Rand (ZAR) Exchange Rate Movement Mixed as South African Inflation Beats Forecasts

The South African Rand has been fairly bullish in recent months, despite the many concerns looming over South Africa’s economic outlook.

South Africa’s June Consumer Price Index (CPI) inflation rate results were published today, with some prints coming in stronger than expected.

The overall monthly and yearly figures printed slightly higher than forecast, at 0.4% and 4.5% respectively. However, the core inflation rate came in at the forecast 4.3% year-on-year.

The data was not seen as strong enough to offset speculation that the South African Reserve Bank (SARB) was likely to cut South African interest rates again.

According to Elize Kruger, Economist at NKC African Economics:

‘Today’s inflation numbers don’t change much, but we believe there is scope for another cut this year. The bank left the door open last week by saying their decisions would be data-dependent,’

Despite these factors though, the South African Rand’s losses against a rebounding Pound were limited.

Investors continue to find the South African Rand appealing due to the currency’s high yields compared to other major currencies.

Pound to South African Rand (GBP/ZAR) Exchange Rate Focuses on New UK Government

Boris Johnson, after becoming the leader of Britain’s Conservative Party yesterday, is expected to succeed Theresa May as Prime Minister within the coming day.

It is currently expected that Johnson will be Prime Minister by this evening, and will make his first Parliamentary comments to MPs tomorrow.

Sterling’s current rebound is limited, as analysts are concerned that a no-deal Brexit will become more likely under a Johnson government.

As a result, investors will be focused on how Johnson’s government cabinet is put together, as well as any fresh comments on his Brexit stances. According to analysts at Daiwa:

‘Focus in particular will be on (Johnson’s) choices for the prominent cabinet positions and for any insight into his strategy of how he plans to deliver Brexit by 31 October,’

Thursday will see the publication of South Africa’s June PPI stats and UK distributive trades data from the CBI, but UK politics and global trade news are more likely to influence the Pound to South African Rand (GBP/ZAR) exchange rate outlook.