The Pound South African Rand exchange rate reclaimed over half of its weekly losses on Tuesday, as traders expressed disappointment at Jacob Zuma’s continued South African Presidency.
Zuma faced a vote of no confidence from the ruling ANC party, but on Tuesday the party confirmed that he would remain. Despite this, GBP ZAR remains below the week’s opening levels of 17.61.
Pound (GBP) Sentiment Mixed amid RBS Stress-Test Fail
Sterling performed solidly on Tuesday, reversing much of the losses seen earlier in the week as traders cut their short positions on the British currency. As a result, bets against the Pound were at their lowest levels since September.
The Pound struggled to hold its best levels however. Even on Wednesday, as its upward bias continued, GBP ZAR failed to hold above 17.50.
Various factors weighed on Sterling demand, including GfK’s November consumer confidence survey, which slipped from -3 to -8; the report’s worst result since July.
The Bank of England (BoE) also published its latest Financial Stability Report. While the bank did not hint significantly at upcoming changes to monetary policy, the Royal Bank of Scotland (RBS) was revealed to have failed the BoE’s latest stress test.
The test was designed to see how high street banks would cope with a global economic crash and the RBS performed the worst of the lot, meaning it needed to revise its capital plans. This left GBP traders slightly jittery and the British currency struggled to hold its best levels.
South African Rand (ZAR) Plummets on Latest Zuma Disappointment, OPEC Jitters
The South African Rand surged at the beginning of the week on hopes that South Africa’s controversial President Jacob Zuma would face a vote of no confidence from his ruling party, the African National Congress (ANC).
However, after Tuesday’s session it became apparent that Zuma would continue on as President. The ANC has since portrayed a united stance, once again letting down market hopes that something would be done about Zuma’s controversial leadership.
Concerns about the future of oil prices also currently weigh on the Rand. As an emerging market, South Africa typically benefits from cheaper commodity prices.
Because of this, the chance that Wednesday’s OPEC meeting could lead to higher oil prices going forward have left the Rand highly volatile.
Pound South African Rand Long-Term Forecast: Oil and Political Uncertainty to Continue Weighing on ZAR
The Rand’s movement over the last week has been familiar to ZAR traders. Every time SA President Zuma’s position comes under question, the Rand surges. However, ZAR also becomes increasingly volatile in times of high oil prices.
This sort of movement is unlikely to end any time soon. As is expected for a risky, emerging-market currency, the South African Rand is likely to continue surging higher and plummeting lower at regular intervals due to ongoing political and commodity factors.
It’s more likely that the tone in Pound trade will be what alters GBP ZAR trajectory going forward. For example, if the Supreme Court rules that the government must allow Parliament to vote on Article 50 in December, the Pound could benefit from new hopes that the UK will retain access to the single market.
However, as 2016 draws to an end and the March 2017 date of beginning the formal Brexit process approaches, GBP ZAR looks to have a very volatile few months ahead of it.
At the time of writing, the Pound South African Rand exchange rate trended in the region of 17.48, while the South African Rand Pound exchange rate traded at around 0.0571.
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