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Pound South African Rand (GBP/ZAR) Exchange Rate Soars as UK Markets Benefit from Ebbing No-Deal Brexit Fears

September 5, 2019 - Written by John Cameron

GBP/ZAR Exchange Rate Rises as No-Deal Brexit is Effectively Ruled Out

The Pound South African Rand (GBP/ZAR) exchange rate soared by 0.9% today, with the pairing trading around R18.308 on ebbing no-deal Brexit fears after last night’s parliamentary vote saw the anti no-deal Brexit bill pass successfully after two separate votes.

As a result, Sterling has risen against many of its competitors today as UK markets heave a sigh of relief as a no-deal Brexit now seems less likely on October 31.

Jane Foley, an Analyst at Rabobank, commented that the Pound is acting like a ‘tidy barometer’ of relief over a no-deal Brexit. She also commented:

‘The pound is clearly not out of the woods with political uncertainty still at very elevated levels - but the risk of a disorderly Brexit next month at least looks set to be pushed off the table.’

Meanwhile, Prime Minister Boris Johnson has sparked fears now that he has turned to the defence pledges as a possible bargaining chip with the European Union.

Shadow Brexit Minister Jenny Chapmen commented:

‘This is further evidence that Boris Johnson’s government wants a distant and abrupt departure from the EU, with minimal cooperation. Johnson is putting ideology above the national interest – even in vital areas such as defence and security.’

ZAR/GBP Exchange Rate Sinks despite SARB Economic Optimism

The South African Rand (ZAR) struggled against the stronger Pound today despite growing optimism over the economy from the South African Reserve Bank’s (SARB) Governor, Lesetja Kganyago.

Mr Kganyago said:

‘Even if we get zero growth for the next two quarters, the South African economy will still grow by 0.3% this year. To get growth of say 1%, the remaining two quarters of the year would have to grow by between 3.6% and 4.5% – that's not quite a scenario that we are looking at the moment and we are still quite comfortable with 0.6%.’

The ZAR/GBP exchange rate also failed to benefit from increasingly hopeful developments between the US and China, as both superpowers agree to renew trade discussions in October.

With China being one of South Africa’s largest trading partners, this has provided some ZAR traders with a reason for optimism in the near term. However, it has failed to provide much uplift for the struggling South African Rand today.

GBP/ZAR Outlook: Sterling Could Rise Once No-Deal Bill is Ruled Out by House of Lords

Pound traders will be looking ahead to tomorrow’s publication of the Halifax house prices for August, which are expected to ease from 4.1% to 3.4%.

With no economic data due out for South Africa tomorrow, SA markets will be focusing on geopolitical developments. Any indications of improving relations between the US and China could begin to restore risk-appetite, thus boosting the risk-averse South African Rand.

The GBP/ZAR exchange rate could edge higher tomorrow if the House of Lords provides assent on the anti no-deal Brexit bill, which would provide further relief for UK markets as a disorderly exit would effectively be ruled out.

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