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Pound South African Rand (GBP/ZAR) Exchange Rate Sinks as ZAR Benefits on Improved Risk-Sentiment

September 12, 2019 - Written by John Cameron

GBP/ZAR Exchange Rate Eases as US-China Trade Relations Improve

The Pound South African Rand (GBP/ZAR) exchange rate fell by -0.6% today, with the pairing currently trading around R17.991 as ZAR improves on higher market risk-sentiment.

The South African Rand (ZAR) has continued to benefit from the rating agency Moody’s indication that it would not cut South Africa’s credit rating to junk status in the near term. As a result, this has provided uplift for the ZAR/GBP exchange rate today.

Jakob Christensen, an Economist at Danske Bank, commented:

‘Moody’s continues to give the [South African President Cyril] Ramaphosa government the benefit of the doubt. A critical part of the reform agenda is Eskom and here Moody’s will await the government plan for the company. If the plan is not forthcoming or is found insufficient, I think the rating agency will pull the trigger and downgrade South Africa to junk.’

The trade-correlated ZAR has also benefited from easing global political tensions, following US President Donald Trump’s offer to delay tariffs on US$250 billion worth of Chinese goods by two weeks.

Trump tweeted:

‘We have agreed, as a gesture of goodwill, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1st to October 15th.’

GBP/ZAR Exchange Rate Falls as Brexit Weighs on UK House Prices

The Pound (GBP) failed to gain against the ZAR following this morning’s release of August’s RICS Housing Price Balance, which improved above consensus from -9% to -4%.

Simon Rubinsohn, Chief Economist at RICS, commented:

‘It is hard to get away from the shadow being cast over the housing market by the seemingly never-ending Brexit saga. Indeed uncertainty is a theme that respondents continue to highlight as a negative influence on sentiment in survey after survey.’

However, Brexit uncertainties continue to haunt UK markets with Prime Minister Boris Johnson and the Conservative Party insisting on honouring the October 31 Brexit deadline.

Meanwhile, the European Parliament has attacked the UK Government’s treating of European citizens living in the UK, further souring relations between the UK and the EU and leaving Sterling traders jittery on no-deal fears.

GBP/ZAR Outlook: Brexit Developments in Driving Seat

The South African Rand will continue to be driven by global political factors, with any signs of easing tensions between the US-China boosting the ZAR/GBP exchange rate.

As there is no significant UK economic data due to be published until next week, the GBP/ZAR exchange rate will likely be driven by Brexit developments.

Any indication that the Conservative Government could compromise on a Brexit deal with the EU would prove Pound-positive.

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TAGS: Pound Rand Forecasts South African Rand Forecasts

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