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Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Slides as No-Deal Fears Damage UK Business Investment

June 26, 2019 - Written by John Cameron

Pound South African Rand (GBP/ZAR) Exchange Rate Falls as Carney sees ‘Notable’ Increase in No-Deal Risk



The Pound Sterling South African Rand (GBP/ZAR) exchange rate slumped and the pairing is currently trading at an inter-bank rate of R18.0702.

On Wednesday, Bank of England (BoE) Governor Mark Carney along with other policymakers spoke in Parliament about the bank’s Inflation Report.

Carney emphasised that the current no-deal Brexit fears were damaging the UK economy, most notably business investment and short-term economic performance.

This likely dampened sentiment in Sterling, as the pairing slumped on Wednesday afternoon.

The Governor also noted that the central bank was still preparing for a no-deal Brexit and market expectations for the UK crashing out of the EU have increased.

Governor Mark Carney stated:

‘We are spending all out time preparing for a no-deal, because that’s what we do – we prepare for the worst outcome.

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‘If we prepare for the worst case any upside we get in terms of fewer tariffs, greater trade is to the benefit of the economy.’

Federal Reserve James Bullard: 0.5% Fed Rate Cut Would be ‘Overdone’



On Wednesday, the South African Rand rose against the Pound despite Federal Reserve officials signalling near-term aggressive interest rate cuts would not happen.

On Tuesday, St Louis Federal Reserve President James Bullard stated a 50-basis-point cut in July ‘would be overdone.’

Despite this, the South African Rand rose against Sterling.

Commenting on this, Citi Analyst, Johanna Chua wrote:

‘Comments from dovish FOMC member Bullard not in support for a 50bp cut in July forced a re-think of market expectations from the FOMC meeting. Risk assets broadly reacted negatively with equities lower and USD stronger.’

South African Rand (ZAR) Rises Ahead of Trump-Xi Meeting



Meanwhile, risk appetite rose which likely buoyed the risk-sensitive South African Rand following comments from the US Treasury Secretary.

Steven Mnuchin stated that the US and China were close to a trade deal and that he is optimistic that progress at Saturday’s Trump-Xi meeting can be made.

Speaking to CNBC, Treasury Secretary Steven Mnuchin said:

‘We were about 90% of the way there [with a deal] and I think there’s a path to complete this.

‘The message we want to hear is that they want to come back to the table and continue because I think there is a good outcome for their economy and the US economy to get balanced trade and to continue to build on this relationship.’

This likely provided an upswing of support for the Rand, allowing it to rise against the Pound on Wednesday.

Pound South African Rand Outlook: Will Disappointing South African PPI Weigh on ZAR?



Looking ahead to Thursday the South African Rand (ZAR) could slide against Sterling (GBP) following the release of South Africa’s Producer Price Index (PPI).

If PPI does not rise as high as forecast in May, sentiment in the South African Rand could be dampened.

Meanwhile, on Friday the Pound could fall following the release of Q1 GDP.

If data reveals the UK economy has not grown by as much as forecast in the first three months of 2019, the Pound South African Rand (GBP/ZAR) exchange rate could slide.






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