GBP/ZAR Exchange Rate Rises as May Talks Up Brexit Success

November 6, 2017 - Written by Toni Johnson

STORY LINK GBP/ZAR Exchange Rate Rises as May Talks Up Brexit Success

Last week, the Pound to Rand exchange rate rose from an opening rate of 18.5585 to close higher at 18.5986 on Friday.

This wasn’t the best rate of the week, however, as the pairing hit a high of 18.8188 just before a Bank of England (BoE) policy announcement.

GBP Trades Higher after PM Reassures on Brexit Preparedness

The minor Pound to Rand rise seen today has come from news about Brexit, specifically reassurances from Prime Minister Theresa May.

Speaking at a Confederation of British Industry (CBI) event, the PM has stated that there are challenges ahead but also opportunities;

‘Our EU negotiating team is now preparing for the next phase, and I particularly welcome the beginning of internal discussions among the EU 27 about their position on our future relationship and the implementation period.

When sufficient progress is agreed we want to move as quickly as possible on both of these issues.

Throughout this process, I have been determined to give business and industry as much certainty as possible.

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We want to forge an ambitious economic partnership, out of the Single Market but with a new balance of rights and responsibilities between us and the European Union.

One which respects the freedoms and principles of the EU, and the wishes of the British people.

May has crucially tried to put the situation in a positive light, saying;

'We should be excited by the possibilities which this new relationship presents for the future, just as we are realistic in acknowledging that it will take time to finalise.

I have made clear that a strictly time-limited implementation period will be crucial to our future success.

I know how important it is for business and industry not to face a cliff-edge and to have the time it needs to plan and prepare for the new arrangements.

During this period our access to one another’s markets should continue on current terms, and I want us to agree the detailed arrangements for this period as early as possible.

But we should also be able to develop our relationships with countries outside the EU in new ways, including through our own trade negotiations'.

This news has largely eclipsed the day’s negative UK data – new car sales have been reported down by -12.2% in October.

ZAR/GBP Rate Slides on Warning about Future Economic Downgrade

The Rand to Pound losses seen today have come from continued uncertainty about the future of the South African economy.

Setting alarm bells ringing recently has been economist Dawie Roodt, who said;

‘Taxpayers’ money is being misspent, which means that the state needs to cut back on its expenditure. This country is in dire straits.

We’ve reached the end of the line. Pushing the economy into recession is the only option. The best advice I give is “take your money out of the country”’.

In a similarly gloomy line, analysts at Anchor Capital have warned about a threat to South Africa’s international economic stability ratings;

‘It is highly unlikely that we will retain our current ratings for the next 12 months and we need to adjust our base case to be that South Africa will be kicked out of the WGBI government bond index’.

GBP/ZAR Forecast: Pound could Turn Volatile on Friday’s Trade Stats

The next UK data to watch out for will come on Friday, leaving the GBP/ZAR rate vulnerable to any surprise Rand rises during the week.

This will consist of the UK trade balance reading for September, along with production readings for the same month.

The national trade deficit is tipped to decline, but mixed production stats could leave GBP traders unsettled.

South African data due before then will come on Wednesday and Thursday. Respectively, this will look at business confidence as well as mining production stats.

Business confidence is expected to decline slightly, while mining data has been forecast negatively.

If these predictions are accurate, the Pound could remain strong against the Rand until Friday, as lower mining activity points to economic difficulties in South Africa.

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