GBP/ZAR Fluctuates As South Africa Discusses Impeachment of President Jacob Zuma
Still almost 0.6% up on this morning’s levels, the GBP/ZAR pair has dipped late in the day as discussions in South Africa’s parliament began, with the potential impeachment of South Africa’s President Jacob Zuma being addressed.
Analysts still expect that the chances of Zuma stepping out of office are highly unlikely, despite many companies cutting ties with the South African President.
The pair’s drop this afternoon could also be the result of further movement from an already-volatile Pound as it flounders on investor uncertainty.
Earlier…
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate began a recovery on Monday that seems likely to continue short-term as South African President Jacob Zuma’s widely publicised constitutional mess-up hurts ZAR sentiment.
HMRC Statements and Domestic Service PMI Give Sterling (GBP) a Boost
Potentially marking an end to the Rand’s rally after the GBP/ZAR pairing hit a 17-month low on Friday, the Pound has been gradually climbing since the week began.
From a low of 20.9268, the pair currently trends in the region of 21.3300; with the Pound up on the Rand almost 1.0% from this morning’s 21.1005.
A variety of factors are involved in the Pound’s upturn. After a period of investor uncertainty on GBP, the currency seems to have regained a little favour this week due to initial reactions to the ‘Panama Papers’ leaks.
The leaks reportedly name dozens of the world’s elite and documents their methods for tax evasion via the use of ‘tax havens’.
Soon after the papers first swept headlines, Her Majesty’s Revenue and Customs (HMRC) made statements claiming that tax evaders would be pursued diligently and money would be recovered for Britain’s economy. This sentiment gave the Pound a small boost.
Pro-Pound attitudes did dip however after UK Prime Minister David Cameron was swept into the scandal amid allegations of his father, Ian Cameron, partaking in tax evasion himself.
Despite this, Sterling was able to continue climbing against the Rand, partially thanks to positive domestic services PMI. The print of 53.7 outdid forecasts of 53.5 and marked an improvement from February’s 52.8.
President Zuma Endures Calls to Step Down, ZAR Confidence Takes a Blow
South African President Jacob Zuma has been embroiled in his own scandal this week after failing to uphold his country’s constitution.
The President had failed to repay a large sum of public money that had been spent upgrading his own private Nkandla home. He had spent a total of $16 million on the project.
As a result of his failing, he had not only been warned by the South African Reserve Bank (SARB) that credit ratings risks have heightened, but also faced a parliament vote to remove him from office entirely.
Public outcry towards Zuma’s actions has been considerable, but with the African National Congress (ANC) on his side, Zuma is now seen as unlikely to step down.
The possibility of credit ratings falling to ‘sub-investment’ grade has considerably hurt the South African Rand, alongside the ‘Panama Papers’ revelation that Zuma’s nephew, Khulubuse Zuma, had also taken part in tax avoidance schemes.
Pound Sterling to South African Rand Exchange Rate Forecast: GBP/ZAR Rally Likely to Continue
Many analysts and investors have begun predicting that if the South African Reserve Bank’s (SARB) warnings bear fruit, South Africa’s economic issues may be far from over.
According to Capital Economics (Reuters reports) the South African public and parliament may be too distracted with continued attempts to oust the unreliable President Zuma, potentially diverting attention from the dire economy.
In the likelihood that Zuma is able to withstand calls to step down and remain in office, sentiment towards the Rand is likely to take another hit.
As for the Pound, its recent fluctuations mean it is more likely to take point in GBP/ZAR movements. While Rand weakness is currently quite decisive, future Pound softness is likely due to heightened British economic stress and general distaste towards Sterling in the build up to the EU referendum.
Data for the British region is quiet until Friday’s production and trade balance releases. Until then, GBP is likely to move on potential developments in the UK steel industry, which currently threatens to cut over 10,000 jobs.
South African foreign exchange reserves and manufacturing production figures are due on Thursday, with slight improvements from previous prints currently expected.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate currently trends around 21.3300 while the South African Rand to Pound Sterling (ZAR/GBP) exchange rate trends in the region of 0.04685.
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