The Pound has made heavy losses against the South African Rand today, despite background optimism about real progress being made in Brexit talks.
Sterling saw initial gains thanks to signs of an actual Brexit breakthrough, but this failed to translate to a GBP/ZAR rate rise.
Clear Agreement to Brexit Plans could Trigger GBP/ZAR Rate Rally
With UK political optimism still relatively high, it is up to negotiators to strike while the iron is hot and press on with Brexit progress.
The Pound to Rand rate could rise next week if the UK is given a ‘pass’ on its Brexit progress.
Over 14th December and 15th December, EU leaders will be meeting to discuss Brexit talks so far.
If they approve of recent UK actions, the leaders may allow negotiators to move on in talks and start discussing a much-desired post-exit trade deal.
On the EU side at least, clarity is the keyword. Explaining the need for the UK government to lay out its goals, BDI Director Joachim Lang said;
‘The hardest part of the negotiations still lies ahead of us. Industry needs clarity on the future relationship at the earliest opportunity.
The negotiations have to step up a gear. London must not have any false illusions.
Our businesses must know soon what model Downing Street envisions for the future deal and what the transition phase on the way there will look like’.
Giving a more optimistic analysis of the situation, Moody’s Lead Sovereign Analyst Kathrin Muehlbronner has said;
‘The announcement that the UK and the EU have reached “sufficient” progress in the withdrawal negotiations is in line with what we expected.
We expect [next week’s] EU summit to endorse the [EU] Commission’s recommendation, meaning that negotiations will move on to a transition period and a new trade relationship’.
If this outlook from Moody’s proves accurate, the Pound could be pushed up against the Rand next week.
ANC Leadership Vote could Bring Further ZAR/GBP Rate Gains
Rising mining output has supported the recent South African Rand advance, although the currency has also been aided by growing political optimism.
As expected, these hopes revolve around controversial President Jacob Zuma, or more specifically who will follow him after he steps down as ANC leader.
While Zuma will still remain national President, this change of ANC leadership still presents an opportunity to put a more competent figure at the top of the party.
Summing up the importance of the leadership change, writers at The Economist say;
‘Next week comes a moment that may determine whether South Africa slides further into this mire or starts to recover.
At a conference that starts on 16th December, the ruling ANC is due to choose the successor to Zuma as its leader, and thus its candidate for presidency of the country.
The front-runners are Mr Zuma’s ex-wife and preferred candidate, Nkosazana Dlamini-Zuma, and the Deputy President, Cyril Ramaphosa.
For South Africa and for the whole African continent, Mr Ramaphosa needs to win’.
While Ramaphosa’s reputation is by no means spotless, he is still considered a more acceptable successor to the scandal-riddled Zuma.
If the ANC looks set to pick Ramaphosa as the next party leader, the South African Rand could rise sharply.
Recent Interbank GBP ZAR Exchange Rates
At the time of writing, the Pound to Rand (GBP ZAR) exchange rate was trading at 18.3584 and the Rand to Pound (ZAR GBP) exchange rate was trading at 0.0544.
Comments are closed.