GBP to ZAR Exchange Rate Trends near New Two-Month-Best amid Rising Oil Prices

August 19, 2019 - Written by Ben Hughes

STORY LINK GBP to ZAR Exchange Rate Trends near New Two-Month-Best amid Rising Oil Prices

Despite higher market demand for currencies correlated with trade and risk today, the British Pound to South African Rand (GBP/ZAR) exchange rate has been trending within a tighter region since markets opened this morning. Investors are hesitant to make fresh big moves on either the Pound or South African Rand amid political and economic uncertainties.

Due to lasting concerns about South Africa’s economic outlook, GBP/ZAR was able to more easily climb throughout last week. Aside from a brief dip in the middle of the week, GBP/ZAR spent most of the week climbing and ultimately gained from 18.34 to 18.59 throughout the week.

This morning, GBP/ZAR touched on a fresh August high of 18.64, which was the best level for the pair in over two months – since June.

Overall though, GBP/ZAR has been trending fairly closely to the week’s opening levels as Brexit uncertainty limits the Pound’s appeal while the South African Rand’s appeal is weighed by mixed market risk-sentiment and rising oil prices.

GBP Exchange Rate Advances Slow Following Last Week’s Rebound

For most of last week, the Pound saw a strong rebound in demand. Investors bought the British currency back from its cheapest levels, and this rebound was bolstered further by the latest UK data and political developments.

Stronger than expected UK inflation stats dampened speculation that the Bank of England (BoE) could cut UK interest rates soon, and stronger UK retail sales slightly doused fears that Britain could fall into a recession in the coming quarters.

Perhaps the biggest cause of Sterling gains last week though, was fresh hopes that a no-deal Brexit could be avoided.

Fears of a no-deal Brexit have been the primary cause of Sterling weakness in recent months. As a result, speculation that Britain’s opposition parties could cooperate to prevent a no-deal Brexit offered markets a little fresh optimism.

The Pound’s gains on this were limited though, as the possibility remains that the latest hopes to prevent a no-deal Brexit may not work.

According to Marshall Gittler, Strategist at ACLS Global:

‘Hopes that something will be found to prevent a no-deal Brexit will send GBP up, as they did on Friday, but then the currency will come back down once it’s realised that those hopes are unfounded.’

ZAR Exchange Rates Fail to Benefit from Risk Sentiment amid Rising Oil Prices

The South African Rand is a currency that is often correlated to trade and risk sentiments in markets.

However, the currency has failed to benefit from the latest market risk-sentiment, due to developments in oil trade.

Prices of oil have been rising due to an attack on a Saudi Arabia oil facility. As South Africa relies on oil imports, higher oil prices often lead to Rand weakness.

Due to this, the Rand was unable to benefit from the latest rise in risk-sentiment, which came as a result of hopes that Germany could introduce new fiscal policy stimulus, as well as hopes for an improved rate mechanism from the People’s Bank of China (PBoC)

The Rand also continued to face pressure amid South Africa’s underlying economic jitters.

The handling of South Africa’s embattled state-owned energy firm, Eskom, continues to face scrutiny from economists. On top of this, fears are rising that Moody’s credit agency will cut South Africa’s credit rating in its next decision.

GBP/ZAR Exchange Rate Forecast: Brexit Developments and South African Inflation Ahead

The South African Rand remains weak amid South African economic uncertainties and rising oil prices, but no-deal Brexit fears continue to weigh on the Pound and limit GBP/ZAR’s potential for gains.

If Britain’s opposition parties fail to show any signs that a cooperation between them could work, or if hopes of talks fall through in the coming days, the Pound could slump again.

On the other hand, stronger hopes of cooperation to prevent a no-deal Brexit would make the Pound more appealing.

The South African Rand, however, is unlikely to see much support in the coming sessions, so chances for GBP/ZAR losses will rely more on the Pound.

Wednesday will see the publication of South Africa’s July inflation rate, which could influence South African Reserve Bank (SARB) speculation if it surprises investors.

Aside from that though, with global trade sentiment mixed and South Africa’s economic outlook concerning, there may be further gains ahead for the Pound to South African Rand exchange rate.

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