GBP to ZAR Exchange Rate Recovers Losses as UK Supreme Court Rules against Government Prorogation

September 24, 2019 - Written by Tim Boyer

STORY LINK GBP to ZAR Exchange Rate Recovers Losses as UK Supreme Court Rules against Government Prorogation

For now, the British Pound to South African Rand (GBP/ZAR) exchange rate has been able to keep holding onto last week’s impressive gains thanks to today’s fresh demand for the Pound, as well as weakness in the South African Rand. Demand for Sterling has risen following today’s surprise ruling from the UK Supreme Court, that the government’s long prorogation of parliament had been unlawful.

Last week saw an impressive surge for GBP/ZAR amid Brexit hopes and fresh global geopolitical tensions. GBP/ZAR opened the week at the level of 18.22 and put in significant gains, closing the week closer to the level of 18.61.

After dipping yesterday and this morning, GBP/ZAR has been recovering this afternoon and currently trends close to the week’s opening levels again. This puts the pair relatively close to Friday’s September high of 18.69.

GBP Exchange Rates Rebound as UK Parliament Set to Reconvene Tomorrow

The Pound may be in for more weeks of Brexit chaos than previously anticipated, as Britain’s Supreme Court ruled today that the government’s long prorogation of parliament was unlawful.

Britain’s government, led by Prime Minister Boris Johnson, had announced that parliament would be prorogued for an unusually long period of five weeks ahead of the Queen’s Speech needed at the beginning of a new government.

Critics said the government planned to limit parliament’s chances to hinder its harder or no-deal Brexit plans.

As a result, the decision was brought to the courts. England’s high court rejected the challenge, but Scotland’s high court ruled that the prorogation was unlawful, which escalated the issue into the Supreme Court.

Today, Supreme Court ruled unanimously that the government’s prorogation was unlawful, announcing that the prorogation was unlawful and that it was up to the House Speaker and MPs whether or not parliament should reconvene.

House Speaker John Bercow later announced that parliament would resume tomorrow.

The Pound advanced in response to the news, amid hopes that MPs would have a longer period of time to take action to prevent a no-deal Brexit.

However, Sterling’s gains were limited amid concerns that Brexit uncertainties persisted, while political uncertainties had overall deepened. According to Edward Park, Deputy Chief Investment Officer at Brooks Macdonald Asset Management:

‘This latest twist in the Brexit narrative likely delays the decision point for Brexit, but does not make it any clearer whether the UK will leave with a deal, without a deal or not at all,’

ZAR Exchange Rates Weak on Trade and Economic Jitters

The South African Rand has been volatile recently, and despite a rise in US-China trade hopes the currency saw weak performance today.

Investors have been selling the currency in profit taking following its advances yesterday, amid a lack of fresh domestic support.

Investors have been concerned about slow South African economic growth lately, and speculation for the South African Reserve Bank (SARB) to support the economy with further monetary policy easing has been doused following a more hawkish than expected policy decision last week.

On top of this, the South African Rand has also been less appealing due to geopolitical tensions between Saudi Arabia and Iran following an attack on a Saudi oil field last week.

GBP/ZAR Exchange Rate Forecast: Developments in UK Politics and Brexit Return to Focus

With the South African Rand volatile and being driven by shifts in geopolitics and risk sentiment this week, the Pound to South African Rand’s more solid movement may be driven by the Pound’s reactions to Brexit news.

UK Parliament is set to reconvene tomorrow, and MPs are likely to quickly begin putting fresh pressure on the government regarding the handling of the Brexit process and negotiations.

If MPs take any fresh steps to prevent a no-deal Brexit, the Pound may see a rise in demand.

On the other hand though, if the stability and future of the government comes under fresh uncertainty, the Pound may be in for losses instead as political uncertainty is Pound-negative.

This week’s African economic calendar is relatively quiet, with only South African PPI data from August due on Thursday.

As a result, the Pound to South African Rand exchange rate will also be influenced by shifts in global risk and trade news.

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TAGS: Pound Rand Forecasts