Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Slumps Ahead of Boris’ First ‘Meaningful Vote’

October 18, 2019 - Written by John Cameron

STORY LINK Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Slumps Ahead of Boris’ First ‘Meaningful Vote’

Pound South African Rand (GBP/ZAR) Exchange Rate Falls as PM Insists he is 'Very Confident'

The Pound Sterling South African Rand (GBP/ZAR) exchange rate slumped this morning, and the pairing is currently trading at around R19.0157.

At the end of the week, the Pound retreated as doubts Prime Minister Boris Johnson’s Brexit deal will receive enough support during Saturday’s ‘meaningful vote’.

On Thursday, news that the UK and European Union had agreed upon a fresh Brexit deal sent the Pound soaring.

However, Sterling remained under pressure as the Democratic Unionist Party (DUP) that props up Boris Johnson’s government said the party will vote against his deal.

Despite this, the Prime Minister has insisted he is ‘very confident’ that MPs will back his deal on Saturday.

Commenting on this, currency analyst at MUFG, Lee Hardman said:

‘[The Pound is] reflecting pessimism over the likelihood of whether the deal will be able to pass through parliament tomorrow. We think it’s going to be a close call. We’re a little more optimistic.

‘If it’s rejected you might get a knee-jerk Pound selloff, but we don’t think the downside risks are that great. We think there’d be an extension and an election. We don’t see no-deal risks coming back to the market.’

South African Rand (ZAR) Rises on the Third Day of Power Cuts

The South African Rand rose against the Pound on Friday as the country faced its third day of power cuts and Eskom warning the outages could be worse than originally expected.

Blackouts from earlier in the year were blamed for a sharp fall in economic growth, with the power cuts in February and March causing first quarter growth to slip into contraction and increased the likelihood of the country losing its last investment-grade rating.

Currently, blackouts in a number of Eskom’s generating units have forced the company to ration power for the first time in seven months, however Brexit pessimism sent Sterling lower against ZAR.

In a statement, Eskom said:

‘Since the media briefing last night, we have had a major setback as we have lost additional capacity from Medupi power station.

‘This means that the power system has deteriorated further creating an additional shortage of generation capacity of about 1,500 MW.’

Pound South African Rand Outlook: Will ZAR Slide on Further Blackouts?

Looking ahead to Saturday, the Pound (GBP) could slump against the South African Rand (ZAR) following the ‘meaningful vote’.

If Prime Minister Boris Johnson struggles to get his Brexit deal through parliament, it is likely Sterling sentiment will be left dampened.

Meanwhile, if South Africa suffers from further days of power cuts and reports suggest there could be extended periods of disruption to power supplies, Rand sentiment could slide and the Pound South African Rand (GBP/ZAR) exchange rate could be left flat.

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TAGS: Pound Rand Forecasts South African Rand Forecasts