GBP/ZAR Exchange Rate Rises as Confidence in UK-EU Trade Deal Grows
The Pound to South African Rand (GBP/ZAR) exchange rate rose by 0.2% today, with the pairing currently trading around R20.065.
Sterling rose today as UK-EU Brexit talks have shown some progress towards a possible trade agreement.
Downing Street has conceded on fishing rights and dropping the controversial Northern Ireland protocol.
Senior cabinet minister Michael Gove said that there is now a ‘smoother glide path towards a possible deal. I hope that we will secure a free trade agreement’.
As a result, UK markets are now more confident that the UK and the EU could compromise on a post-Brexit trade deal, boosting optimism for the British economy in the months ahead.
Meanwhile, Covid-19 vaccine rollouts are also building confidence in the British economy’s recovery.
Neil Wilson, an analyst at Markets.com, said:
‘As the UK’s vaccination programme begins, the Oxford University and AstraZeneca vaccine has been confirmed as being safe and effective in a Lancet study. The news further underpinned confidence in the reopening trade.’
South African Rand (ZAR) Dips as Outlook for South African Remains Uncertain
The South African Rand (ZAR) struggled against Sterling today despite an uptick in South Africa’s Business Confidence Index for October, which saw the figure rise to 93.4.
The South African Chamber of Commerce and Industry (SACCI)
‘The present short-term month-on-month recovery of 1.4 index points in the BCI is primarily the result of the low base of activity from where the recovery is gradually gaining traction.
‘Low inflation, the recovery in certain trade categories, and the reset of international trade and commodity prices, are the major developments that contributed to an improved business climate at present.’
Today also saw South Africa’s Retail Sales report for September fall below forecasts to -1.8%.
As a result, ZAR investors are becoming more concerned about South Africa’s economy, especially as a stimulus package is unlikely to be released for some time.
Despite South Africa having exited a recession – its longest in 28-years – markets are remaining cautious as there is still a long road to recovery.
Boingotlo Gasealahwe, Africa economist at Bloomberg, commented:
‘The recovery is already losing momentum while a resurgence in Covid-19 may call for tighter containment measures. We expect only a modest recovery until vaccines become widely available.’
GBP/ZAR Forecast: Could a Brexit Breakthrough Send Sterling Soaring This Week?
Pound (GBP) investors will be awaiting tomorrow’s release of the final Gross Domestic Product data for October.
Any improvement in the outlook for the British economy would prove GBP-positive.
However, Brexit developments will remain firmly in focus this week.
As a result, we could see Sterling continue to edge higher if a UK-EU trade agreement appears more likely by the year-end.
Meanwhile , South African Rand traders will be monitoring tomorrow’s release of the South African Manufacturing Production Index for September.
If this continues to fall, however, we could see ZAR suffer.
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