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GBP ZAR Exchange Rate Surges on UK Election Speculation

April 19, 2017 - Written by Toni Johnson

The GBP ZAR exchange rate has surged over the last 24 hours following the surprise announcement from Prime Minister Theresa May that she is seeking to hold an early general election on the 8th of June.

In her announcement the PM reasoned that her decision to call an early election was due to the political split in parliament saying that while ‘the country is coming together, Westminster is not’ and that she hoped the election would give the chance for the UK to get a government that puts the ‘majority first’.

With recent polls suggesting that the Tories’ enjoy a 17 point lead against Labour, analysts are forecasting a landslide victory for Theresa May.

While markets are likely to remain upset that a greater Conservative majority for Theresa May makes the likelihood of leaving the single market almost guaranteed, they are hopeful that a landslide victory would silence her critics and grant her greater authority in Brexit negotiations.

In a research note published today global financial services firm, Morgan Stanley said;

‘In the base case the UK government would have the Parliamentary majority to push through difficult decisions to seal a deal. In addition, the next Parliament should have time to complete Brexit negotiations before the next scheduled UK election in June 2022.’

MPs are set to vote on the snap election later today, with observers expecting it to pass after it gained the support of most major political parties yesterday.

Meanwhile the South African Rand was weakened by growing concerns that South Africa’s economy will struggle to recover from its recent setbacks.

South Africa’s sovereign credit rating was recently downgraded to ‘Junk status’ following the removal of much respected finance minister, Pravin Gordhan amid a reshuffle of his cabinet, with markets fearing the uncertainty that this will bring especially as Zuma hopes to pursue ‘radical’ economic reforms.

Mike Cirami of investment firm Eaton Vance said;

‘Gordhan is a well-respected figure in the battle against pervasive government corruption. The new cabinet members have ties to Zuma and are largely unknown to investors, creating further uncertainty in South Africa's financial markets and what this might mean for long-term policy.’

Looking ahead movement in the Pound is likely to driven by speculation over the upcoming general election this week as a lull in domestic data until Friday’s retail sales figures, leaves investors focused on political movements.

Meanwhile the Rand may struggle next week following the release of South Africa’s latest Consumer Confidence data on Monday as analysts predict that the recent political infighting will likely weigh on sentiment.

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