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GBP to ZAR Exchange Rate Gains Limited on Brexit Panic despite Emerging Market Selloff

March 28, 2019 - Written by Frank Davies

Despite plummeting emerging market currencies this week, the British Pound to South African Rand (GBP/ZAR) exchange rate’s gains have been limited over the last session as the Pound has also been bearish among forex investors. With both currencies highly unappealing, markets are now anticipating more major developments.

Since opening this week at the level of 19.15, GBP/ZAR has seen volatile movement, having slipped as low as 18.86, before briefly climbing to a fresh 2019 high of 19.38. At the time of writing on Thursday afternoon though, GBP/ZAR was trending a little lower again, near the level of 19.21, as the Pound’s weakness prevented its further gains.

As the Brexit process continues to see fresh uncertainties and concerns about the future of the UK government are now rising too, the Pound has struggle to capitalise on the South African Rand’s risk-correlated weakness.

The South African Rand has been dragged lower by a plummeting Turkish Lira (TRY), amid market anticipation for Moody’s latest sovereign ratings decision on South Africa.

GBP Exchange Rates Struggle to Hold as Brexit Uncertainties Mount


The Pound briefly jumped versus unappealing emerging market currencies like the South African Rand yesterday, but the British currency’s own support has been too limited to help it hold those gains.

Investors sold the Pound last night following reports that UK Prime Minister Theresa May was willing to resign from her role if it helped to pass the government’s Brexit plan.

Sterling only became less appealing as UK Parliament failed to vote in favour of any ‘indicative votes’. This meant that there was still no consensus in Parliament over how Brexit should be handled.

Not only that, but Prime Minister May’s plan to resign to boost the popularity of her Brexit plan appears to have had mixed results.
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While she has gotten some more support from hard Brexit supporting backbenchers, Northern Ireland’s Democratic Unionist Party (DUP) has indicated it will still not support the plan.

Meanwhile, the opposition Labour Party has indicated that May’s plan to step down actually makes them less likely to support it.

The government is reportedly planning to hold a vote on its Brexit plan in some way tomorrow, but analysts perceive Brexit as still being stuck in deadlock and this is keeping pressure on Sterling. According to Paul O’Connor from Janus Henderson Investors:

‘The clock is ticking and the pressure is building. If Parliament cannot establish support for either Theresa May’s plan or one of the other Brexit options in the days ahead, then the UK will need to request an extended delay to the Brexit process to avoid the alternative “no deal” Brexit on April 12.’


ZAR Exchange Rates Unappealing due to Numerous Factors


The South African Rand has been unable to hold its ground even versus a weak Pound in recent sessions, as recent South African news and news influencing global risk-sentiment is leaving the currency unappealing.

The South African Reserve Bank (SARB) held its March policy decision this afternoon, and as expected the bank left monetary policy frozen.

The SARB Governor, Lesetja Kganyago, indicated that South Africa’s economy would remain strained due to poor business confidence.

Ongoing energy issues from Eskom, South Africa’s state-owned energy firm, were also likely to continue to weigh on South African economic activity.

With Moody’s due to hold its latest ratings decision on South Africa at the end of the week, these ongoing economic uncertainties made investors jittery.

On top of concerns about South Africa’s economic activity though, investors were selling the risky emerging market currency as well as other emerging market currencies due to broad weakness in the Turkish Lira (TRY).

GBP/ZAR Exchange Rate Forecast: Brexit Jitters May Outweigh Risk-Aversion


Friday will see the publication of some UK and South African data, including South African private sector credit and some typically influential UK stats such as consumer confidence, growth rate and business investment figures.

However, these stats are likely to take a backseat to the day’s potential political developments, at least when it comes to the Pound to South African Rand exchange rate.

The biggest focus will remain on potential Brexit news, as the UK government is still aiming to hold some kind of vote on its Brexit plan tomorrow.

If UK Parliament doesn’t allow the vote, or if the vote is blocked for a third time, uncertainty over Brexit will deepen and the Pound could be in for stronger late-week losses as investors become more concerned about the possibility of a no-deal Brexit.

Investors will also be anticipating the next round of ‘indicative votes’, which are currently due to be held on Monday.

The South African Rand, on the other hand, will be influenced by shifts in market demand for risky emerging market currencies.

The Pound to South African Rand exchange rate could tumble if the Turkish Lira (TRY) rebounds and investors buy emerging market currencies from their lows.
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