Pound to South African Rand Exchange Rate Advances Following Monday’s Low
Weakness in the Pound (GBP), as well as the tail end of the South African Rand’s (ZAR) Ramaphosa rally, caused the Pound to South African Rand (GBP/ZAR) exchange rate to briefly touch on a multi-month low on Monday.
After tumbling from 16.62 to 16.36 last week, GBP/ZAR hit the level of 16.24 on Monday, the pair’s lowest level since June 2017. Since then though the pair has rebounded, and on Tuesday was trending above the level of 16.40.
Anticipation for key upcoming data, as well as market hopes for developments in the Brexit process, helped to boost the Pound on Tuesday morning.
The South African Rand has also been weaker, as the recent Ramaphosa rally has seemingly fizzled out.
South African Rand (ZAR) Exchange Rate Rally Loses Steam
The South African Rand has seen strong demand throughout February so far, and it’s largely been due to South Africa political developments.
Following efforts to oust the controversial ex-SA President, Jacob Zuma, Zuma finally resigned earlier in the month. His successor, the market-popular Cyril Ramaphosa, became South Africa’s President on the 15th of February.
Market anticipation for a Ramaphosa Presidency caused a surge in demand for the South African Rand earlier in the month, with investors hoping for the new President to crack down on government corruption.
However, as a Ramaphosa Presidency had already been largely priced into the Rand by the time he took office, the Rand rally began to slow last week and may now have come to an end.
Demand for the risky Rand has also been weakened by a stronger US Dollar (USD) since last Friday.
Pound (GBP) Exchange Rates Boosted by Fresh Brexit Hopes
Amid a lack of impressive UK ecostats in recent sessions, Pound exchange rates have been driven largely by Brexit uncertainties – and Brexit hopes.
Market concerns that a UK-EU transitional deal may not be a certainty, as well as uncertainty about the UK government’s stance on post-Brexit trade, have weighed on Sterling in recent sessions.
However, a report published by Business Insider on Tuesday claimed that the European Parliament was preparing to call for Britain to have privileged access to the European single market post-Brexit.
According to the report;
‘The European Parliament is preparing a “detailed,” 60-paragraph resolution which will call for more flexibility in future relationship talks with Britain.
The Parliament wants the EU to negotiate an ‘association agreement’ which could give Britain “privileged” single market access and membership of EU agencies.’
Notably, the report indicates that the European Parliament was willing to break with the position of EU chief negotiator Michel Barnier.
Sterling surged as investors considered the possibility that Britain could enjoy special single market access even after Brexit, as this would significantly lighten ‘hard Brexit’ fears.
Pound to South African Rand (GBP/ZAR) Forecast: Political News and Data in Focus
There is plenty on the near horizon which could influence the Pound to South African Rand (GBP/ZAR) exchange rate outlook, including both political developments and upcoming ecostats.
Any further news on the European Parliament’s post-Brexit plans could have a big influence on the Pound outlook, especially if the plans have the potential to heavily influence the course of Brexit negotiations.
Wednesday’s UK data could also be highly influential, as it will see the publication of Britain’s December job market results including the latest wage growth stats.
The Bank of England (BoE) has recently played up the importance of wage data, amid concerns about a lasting consumer pay squeeze in the UK.
If UK wages impress, Bank of England interest rate hike bets could rise and the Pound could strengthen.
South African Rand investors, on the other hand, are anticipating South African economic news due on Wednesday.
South Africa’s January inflation rate will be published and SA Finance Minister Malusi Gigaba will be holding the latest budget speech.
He is expected to provide an early insight into how the new Presidential administration plans to repair South Africa’s ailing economy, which will be vital to the ZAR outlook.
Comments are closed.