Pound Sterling (GBP) to South African Rand (ZAR) Fluctuates near Weekly Lows

December 22, 2016 - Written by Minesh Chaudhari

STORY LINK Pound Sterling (GBP) to South African Rand (ZAR) Fluctuates near Weekly Lows

The Pound to South African Rand exchange rate fell on Tuesday and has fluctuated near its worst weekly levels since then. Due to a lack of fresh supportive factors for the Pound, investors have seen little reason to buy it this week.

GBP/ZAR began the week trending at 17.48 and on Tuesday dropped into the region of 17.20. Despite some brief ventures above 17.30, the pair has not sustained any notable recovery.

Pound (GBP) Limp on Borrowing Stats and Brexit Fears

Have investors been too optimistic about the possibility of post-Brexit single-market access in recent weeks? That’s what some analysts have been suggesting and this week’s news has influenced traders to rethink their positions on the Pound.

Wednesday’s session saw the publication of Britain’s November public sector net borrowing figures, which were already forecast to come in at a worrying 11.6b before the final figure of 12.2b was printed, bringing UK national debt to a new record high.

The downside risks continued to emerge on Thursday, when it was revealed that any member of the EU had the ability to veto a post-Brexit UK-EU trade deal, including single-market access.

South African Rand (ZAR) Holds Ground as Oil Prices Slide

As South Africa is an emerging market it often benefits from lower oil prices making the commodity easier to import. Oil prices have slumped in recent days due to a surprising increase in US crude stocks, as well as expectations that Libya will be increasing oil production and output.

The South African Rand had previously seen mixed movement due to the Federal Reserve’s hawkish 2017 forecast last week and the strong performance of oil until Wednesday.

Risk-sentiment has been low since the Fed’s meeting on expectations of higher US interest rates in the coming year, which remains a downside factor in ZAR trade and has limited the Rand from pushing GBP/ZAR down further.

GBP/ZAR Forecast: UK Q3 Gross Domestic Product Figures Ahead

The Pound to South African Rand exchange rate could see some data-inspired movement towards the end of the week, but only if Britain’s final Q3 Gross Domestic Product (GDP) results defy expectations somehow.

UK growth is expected to come in as projected in preliminary figures; 0.5% quarter-on-quarter and 2.3% year-on-year.

Any deviation from this could alter the trajectory of Pound trade, but underlying Brexit concerns as well as quiet pre-holiday trade may leave Sterling limp regardless.

This, as well as a lack of South African ecostats due on Friday means the GBP/ZAR exchange rate is unlikely to recover by the end of the week and will likely register losses this week as a result.

Quiet trade is to be expected next week too. While South Africa’s Q4 consumer confidence figures will be published on Monday, many major markets will be closed for much of next week to observe the holiday period.

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TAGS: Pound Rand Forecasts