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Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Recovers Ground in Spite of Brexit Worries

January 28, 2019 - Written by Frank Davies

Market Risk Aversion Shores up Pound Sterling South African Rand (GBP/ZAR) Exchange Rate

A renewed sense of market risk aversion saw the Pound Sterling to South African Rand (GBP/ZAR) exchange rate recovering ground on Monday afternoon.

Although the GBP/ZAR exchange rate started the week on a weaker footing as Brexit-based optimism faded this was not enough to prevent a rebound.

As signs continue to point towards a slowdown in the Chinese economy the appeal of the risk-sensitive South African Rand diminished.

ZAR exchange rates also came under pressure as a result of a stronger US Dollar, which picked up thanks to the end of the long-running US government shutdown.

With investors taking a less risk-positive outlook, in spite of impending US-China trade talks, the Rand was left to trend lower across the board.

Brexit Developments Forecast to Add to GBP/ZAR Exchange Rate Volatility

However, the GBP/ZAR exchange rate may struggle to hold onto a stronger footing for long as speculation over Brexit mounts.

Volatility is likely in store for the Pound as a result of Tuesday’s parliamentary debate on Brexit, with MPs set to vote on proposed amendments to Theresa May’s withdrawal agreement.

Unless there is evidence of a shift towards a greater consensus among MPs the mood towards the Pound is likely to sour.

With the March deadline drawing ever closer the uncertainty surrounding Brexit looks set to become an even greater drag on GBP exchange rates.

Any indication that the odds of a no-deal Brexit have risen could send the Pound into a sharp slump, meanwhile.

South African Rand (ZAR) Exchange Rates to Struggle Ahead of Credit Data

The South African Rand may struggle to find a rallying point in the days ahead, especially if market risk aversion persists.

December’s private sector credit data is forecast to show an easing on the year, pointing towards a greater level of caution within the South African economy.

However, if the latest trade data shows a widening of the surplus the appeal of the Rand could recover on Thursday.

As long as doubts over the underlying health of the South African economy persist, though, ZAR exchange rates are unlikely to hold onto any degree of bullishness for long.

Uptick in UK Net Consumer Credit to Support Pound Sterling Exchange Rates

Away from political developments, the Pound may find fresh cause for confidence on the back of the latest UK net consumer credit and mortgage approvals figures.

Any uptick in borrowing could encourage confidence in the domestic outlook, with higher levels of credit likely to bolster economic activity.

As long as signs continue to point towards consumers shaking off worries over Brexit-based uncertainty the GBP/ZAR exchange rate should find continued support.

However, as the Bank of England (BoE) has expressed concerns over high levels of household debt in the past an increase in net consumer credit may dent the odds of interest rates rising in the months ahead.
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