GBP to ZAR Exchange Rate Tumbles After Volatile Week

November 17, 2017 - Written by Ben Hughes

STORY LINK GBP to ZAR Exchange Rate Tumbles After Volatile Week

Solid UK retail sales data and anticipation for Brexit developments couldn’t help the British Pound to South African Rand exchange rate to hold its ground on Friday. Weakness in the US Dollar (USD) led emerging market currencies like the Rand to strengthen.

The pair saw volatile trade for most of the week. GBP/ZAR began the week at the week of 18.98 and generally fluctuated, until Thursday and Friday when the pair tumbled to its worst levels since the beginning of November, 18.44.

Pound (GBP) Investors Anticipating Further Brexit Developments

Sterling saw slightly stronger domestic support towards the end of the week, but this did little to boost it against a strengthening South African Rand as investors developed an appetite for emerging market currencies.

On Thursday, Britain’s October retail sales results beat expectations in both major prints.

The month on month retail report was forecast to rise from -0.8% to 0.1%, but instead climbed from a revised -0.7% to a better than expected 0.3%.

The yearly figure, on the other hand, was expected to plunge to -0.6%, but only slipped from -1.3% to -0.3%.

The report boosted market hopes that Britain’s retail sector was still more resilient than expected, despite the ongoing UK pay squeeze.

However, many analysts warned markets not to become too optimistic about the report, claiming that the retail outlook was still filled with uncertainties.

Towards the end of the week, Brexit news took focus once more as reports emerged that UK Prime Minister Theresa May would make fresh attempts to break deadlocks in Brexit negotiations.

Markets became more hopeful for major developments to be made in December, following comments from one of Theresa May’s spokesmen;

‘Prime Minister May and (European Council) President Tusk agreed that there is more work to be done and discussed how to take further steps forward together in advance of the European Council in December,

In positive discussions, the two leaders spoke about the progress which had been made so far in the negotiations on citizens’ rights, Northern Ireland and the financial settlement,’

Still, until there are real signs of progress in Brexit talks, Sterling’s potential for gains is highly limited.

South African Rand (ZAR) Benefits from Emerging Market Sentiment

Despite political concerns weakening the South African Rand at the beginning of the week, the currency has since surged – largely due to weakness in the US Dollar (USD).

Thursday night’s reports that US Special Counsel Robert Mueller had allegedly served subpoenas to a dozen officials from the Trump 2016 campaign caused widespread political uncertainty in the US.

With the US Dollar plunging across the board, many investors saw it as an opportunity to buy into emerging market currencies like the South African Rand, which saw significant gains against major rivals on Friday.

The Rand also benefitted from some mid-week stats, as South Africa’s September retail sales report beat expectations in its year on year print.

This was despite concerns about the independence of South Africa’s Treasury, as SA budget chief, Michael Sachs, had left due to pressure from SA President Jacob Zuma.

On top of this, ZAR investors are jittery ahead of credit rating reviews taking place next week. As a result, Friday’s Rand rush is unlikely to last.

GBP/ZAR Forecast: Brexit and Budget Ahead

Unless UK Gross Domestic Product (GDP) projections are notably impressive next Thursday, domestic ecostats are unlikely to have much impact on Pound exchange rate movement in the coming week.

Instead, potential developments in the Brexit process, or optimistic fiscal policy news from the Autumn Budget, will likely be the focuses.

UK public sector net borrowing data from October will be published on Tuesday and could be set the tone for Wednesday, when the Autumn Budget will be presented by UK Chancellor Philip Hammond.

Meanwhile, there are many big events on the calendar for South African Rand traders in the coming week.

South Africa’s October inflation rate will be published on Wednesday, followed by the South African Reserve Bank’s (SARB) latest interest decision on Thursday.

On top of this, Friday is set to see credit rating agencies S&P and Moody’s review their ratings for South Africa, which could inspire some late-week drops in the Rand if they disappoint.

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TAGS: Pound Rand Forecasts