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Pound South African Rand (GBP/ZAR) Exchange Rate Steadies as SA Economy Struggles on Lack of Risk Appetite

May 20, 2019 - Written by John Cameron

GBP/ZAR Exchange Rate Flat as SA Economy Struggles as US-China Trade War Continues

The Pound South African Rand (GBP/ZAR) exchange rate is steady today and is trading around R18.3048 on the inter-bank market.

The South African Rand (ZAR) stabilised against the Pound (GBP) as the South African economy continues to struggle from a lack of risk appetite, with the US and China embroiled in a trade war.

Meanwhile, Eskom, a major supplier of South Africa’s electricity, has been provided a R12.5 billion stimulus injection to maintain its performance, together with a R8.5 billion government emergency fund.

This has caused many analysts to remain cautious, as South Africa’s uncertain economy, and Eskom’s struggle, is causing concerned as to whether it will tide over to its year end in June.

Mike van der Westhuizen, a Portfolio Manager at Citadel Holdings Ltd, commented:

‘There are still tough decisions that need to be made, and they need to be made urgently. Until a realistic and credible turnaround strategy, with timelines, is announced, we remain very cautious on Eskom, as well as South Africa sovereign-credit risk.’

The Pound failed to gain on the South African Rand despite Prime Minister Theresa May pledging a ‘new and improved’ Brexit deal which she hopes to pass through Parliament in June.

GBP/ZAR Exchange Rate Rangebound as UK House Prices ‘Defied Brexit’

The Pound was left unmoved by the publication of the Rightmove House Price Index figures for May, which eased to 0.9% against April’s 1.1%.

Miles Shipside, an Analyst at Rightmove, said:

‘[This] defied Brexit … [and] despite the ongoing political uncertainty, agents are reporting that the lure of the right property at the right price still attracts good interest.’

Theresa May’s ‘bold offer’ with a new Brexit deal has, however, left many Sterling traders feeling underwhelmed.

Stephen Barclay, the Brexit Secretary, warned MPs, saying:

‘Members of parliament do need to face facts, and if the deal were not to go through then there are only two alternatives – you either leave with a no-deal or you revoke.’

The upcoming European Elections this week are also putting pressure on both major parties, as Labour and the Conservatives are seen to be losing grip as pro-Brexit parties become increasingly favourable in polls.

GBP/ZAR Outlook: US-China Trade Talks and Brexit Developments in Focus

Sterling traders will be looking ahead to tomorrow’s UK inflation report hearings, and with any signs of the UK’s economy struggling due to political uncertainty surrounding Brexit, this could begin to weigh on the GBP/ZAR exchange rate.

South African Rand investors, meanwhile, will be looking ahead to Wednesday’s printing of the South African CPI figures for April, which are expected to remain static.

The GBP/ZAR exchange rate will remain fixated on political developments, with the US-China trade war likely to weigh on the risk-sensitive South African economy, while any indications in the UK that Theresa May can gain traction for her new Brexit deal would prove Pound-positive.

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