The Pound has lost ground against the Rand on Thursday’s trading session, owing to mixed feedback on the Brexit process.
Sterling has slipped to trade at 18.1853, following a joint press conference by David Davis and Michel Barnier. Davis was optimistic about the Brexit process so far, but Barnier warned that there was still a long way to go before total agreement.
(First published September 28th, 2017)
The Pound has recently appreciated against the South African Rand and stands to make greater gains if Brexit discussions bring significant progress.
Pound Forecast: Brexit Breakthrough could Trigger GBP ZAR Trading Surge
The Pound has a chance at rallying against the South African Rand in the future, depending on whether the Brexit process gets moving again.
In recent weeks, talks have stalled because of ongoing disagreements between UK and EU negotiating teams.
This has been a clash between two different ideologies – the EU side want to work through discussions in a fixed order, while UK officials want to tackle post-Brexit trade above anything else.
Just recently, Brexit Secretary David Davis has been optimistic about the process, stating;
‘I am clear that we have made considerable progress on the issues that matter.
[These include] increasing certainty for citizens and businesses, providing reassurance to our EU partners in regards to our mutual financial obligations and agreeing on some of the key principles in relation to the issues arising for Northern Ireland and Ireland’.
Not everyone has been so cheery about the ongoing talks, however. One of the founding members of the Bank of England (BoE) Monetary Policy Committee (MPC), DeAnne Julius, has warned that;
‘Negotiations could fall apart at any time because some of the (preconditions) are win-lose, not win-win, and that’s not how you start a successful negotiation, you don’t start with the win-lose issues’.
In the event that both parties seem to have settled issues like the Irish border and a ‘divorce bill’, the Pound could appreciate sharply against the Rand.
After these initial hurdles were cleared, the UK team would seemingly be free to move onto their most-wanted topic – arranging a post-Brexit trade deal with the EU.
Rand Outlook: Further Deterioration Set to Drag ZAR Further Down
While the recent Rand to Pound slip is nothing unusual, it may be just the first of many downward lurches for the South African currency.
The latest ZA news has been negative, with the World Economic Forum global competitiveness index showing a drop in South Africa’s placing.
While the country placed 47th in 2016, it has since tumbled 14 places to 61st this year. Looking at the rest of sub-Saharan Africa, this is still a strong placing, but obviously reflects poorly on the country’s global ranking.
The WEF report showed that South Africa’s economic growth was borderline static; GDP is only expected to grow by 1% this year and by 1.2% in 2018. Explaining the problems faced by South Africa has been Bernard Agulhas, CEO of the Independent Regulatory Board for Auditors;
‘Confidence in financial markets is dependent on perceptions of how safe it is to do business in a country, and such perceptions are influenced by levels of corruption, crime, downgrades and strength of financial institutions’.
If South Africa suffers from further poor economic reports in the future then the Rand could lose even more ground to the stronger Pound.
Recent Interbank GBP ZAR Exchange Rates
At the time of writing, the Pound to Rand (GBP ZAR) exchange rate was trading at 18.1848 and the Rand to Pound (ZAR GBP) exchange rate was trading at 0.0549.
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