February 19, 2019 - Written by John Cameron
STORY LINK Pound South African Rand (GBP/ZAR) Exchange Rate Up Nearly 1% on Eskom Crisis
GBP/ZAR Exchange Rate Soars on South African Economic Concerns
The Pound South African Rand (GBP/ZAR) exchange rate soared 0.9% higher today, and is currently trading in the region of R18.3906.
The South African Rand is coming under considerable pressure today as the South African government continues to provide financial support to South Africa’s major private electricity supplier, Eskom, which is currently facing a major financial crisis and debt of R420bn.
Alf Lees, of The Democratic Alliance, commented:
‘A bailout of major proportions as well as tariff increases will have to be announced tomorrow.’
These were followed by words of caution from Rashaad Arma, an analyst at PBO, who said:
‘If government attempts to maintain the ceiling; where would additional resources be made available from? [...] This will have implications of debt as a share of GDP over the medium term.’
As the South African economy struggles to maintain its expenditure ceiling, and the Government spirals further into debt, confidence in ZAR is quickly dwindling.
There are no notable South African data releases today, with ZAR traders focusing on the nation’s political and economic woes instead.
The Pound, meanwhile, was uplifted following the release of the UK’s latest employment data.
UK average earnings, excluding bonuses, increased by 3.4% – the best result in a decade.
The UK’s jobless rate also remained steady at 4%, proving Pound-positive.
Matt Hughes, a Senior Statistician at the ONS, commented:
‘The labour market remains robust, with the employment rate remaining at a record high and vacancies reaching a new record level.’
Pound South African Rand (GBP/ZAR) Exchange Rate Rises as May Under Pressure to Avoid No-Deal Brexit
Pound (GBP) exchange rates also benefited from comments from the President of the European Commission, Jean-Claude Juncker, today who indicated that the EU could potentially agree upon a possible extension of Article 50.
‘If you are asking for how long the withdrawal can be postponed, I have no timeframe in mind… With Brexit so many timetables have already gone by the wayside.’
Prime Minister Theresa May, meanwhile, is coming under increasing pressure from senior ministers over her failure to remove a no-deal Brexit from the table, with reports that a number of ministers could further resign unless May retracts the possibility of a chaotic Brexit.
Following yesterday’s resignation of 7 Labour MPs, this is increasingly becoming an urgent issue for May prior to her visit to Brussels tomorrow, and some GBP traders remain hopeful that May will concede and remove the lingering threat of a no-deal.
GBP/ZAR Forecast: Pound Could Rise Further if Brexit Extension Looks Likely
The GBP/ZAR exchange rate will likely be dictated by political developments tomorrow, with May set to return to Brussels, and ZAR traders paying particular attention to the SA budget speech.
South Africa’s inflation report will also be of interest.
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TAGS: Daily Currency Updates Pound Rand Forecasts South African Rand Forecasts