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GBP to ZAR Exchange Rate Surges as South Africa?s Controversial Leader Holds Role

April 5, 2017 - Written by Ben Hughes

The British Pound to South African Rand exchange rate continued to edge higher on Thursday afternoon and tested the week’s highest levels.

Despite the Pound weakening as the services PMI rally faded, it was still able to gain on the weak South African Rand. However, according to a Thursday Reuters poll, analysts believe the Rand will stabilise for the rest of 2017 as the events of the last week are already priced in to ZAR trade.

[Previously updated 06/04/2017]

The outlook for the Rand remains volatile, with demand for the risk-sensitive currency weakening in response to a more hawkish Federal Reserve outlook.

Nevertheless, as confidence in the Pound quickly started to wane in the absence of fresh domestic data the GBP ZAR exchange rate was unable to hold onto its earlier gains.

[Previously updated 05/04/2017]

The British Pound to South African Rand has seen huge fluctuations this week. This is due largely to widespread political uncertainty in South Africa, following last week’s SA cabinet shuffle and sacking of the nation’s finance minister, Pravin Gordhan.

GBP/ZAR opened this week at the level of 16.8416. The pair fluctuated earlier in the week and fell back to its opening levels on Wednesday morning. However, the pair surged to a new 2017 high of 17.2921 later in the day as SA President Jacob Zuma finds support.

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GBP Bolstered by Strong UK Services Data



Demand for the Pound improved on Wednesday and the British currency firmed, allowing it to more easily capitalise on a weak and volatile South African Rand.

Wednesday’s UK services PMI for March, published by Markit, comfortably beat expectations. As a result, concerns that Britain’s economy was beginning to show sure signs of slowing faded slightly and the previously limp Pound gained support.

The services print was expected to rise slightly from 53.3 to 53.5, but instead rose to an impressive 55. After poor UK manufacturing data on Monday, investors had become concerned that Britain’s services sector could also have slumped.

While some analysts noted that employment in the services sector slowed in March, the print generally indicated that Britain was going through a solid period of growth.

ZAR Plummets as SA President Zuma Survives Calls to Quit



Last week saw South Africa’s controversial President, Jacob Zuma, shock markets when he reshuffled the government cabinet and sacked the nation’s popular Finance Minister, Pravin Gordhan. This led South Africa’s credit rating to be cut to ‘junk’ status.

Since then, calls for Zuma to step down have increased from critics and allies alike. Political uncertainty and instability has left the South African Rand extremely weak.

However, during Wednesday’s session it was confirmed that a major decision making body in the African National Congress (ANC) was still supporting the President. The ANC is the ruling party of South Africa, of which Zuma is the leader.

After considering the calls for Zuma to be fired, the ANC decided not to push for his resignation according to party officials.

GBP/ZAR Forecast: Further Uncertainty Ahead for Rand Traders



The South African Rand may not look appealing to forex market traders in the near future. Standard & Poor’s decision to cut South Africa’s credit rating to ‘junk’ will have serious downside effects on the embattled currency that will not be reversed any time soon.

Amid the market’s current risk-averse mood, the Pound is simply far more appealing to traders than the Rand. This could lead GBP/ZAR to begin to recover even further from its 2017 lows and challenge the levels seen in late 2016.

Friday’s UK data could give the Pound a bit more of a boost if they impress investors.

February’s trade deficit report will be published and is expected to deepen slightly. If it comes in lighter than expected, the Pound will firm.

Manufacturing and industrial production results from February will also be published.

Last but certainly not least, Bank of England (BoE) Governor Mark Carney will be holding a speech on Friday. While it’s unlikely Carney will talk monetary policy, any indication of the bank’s current outlook on the UK economy could inspire GBP movement.

South African foreign exchange reserves data from March will be published on Friday, but this typically low-influence result will likely be brushed over while investors focus on South Africa’s political uncertainty.
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