Pound South African Rand (GBP/ZAR) Exchange Rate Slumps as Johnson Threats to Freeze Withdrawal Agreement

October 25, 2019 - Written by Frank Davies

STORY LINK Pound South African Rand (GBP/ZAR) Exchange Rate Slumps as Johnson Threats to Freeze Withdrawal Agreement

Boris Johnson’s Election Push Drives Down Pound Sterling South African Rand (GBP/ZAR) Exchange Rate

The latest comments from Boris Johnson saw the Pound Sterling to South African Rand (GBP/ZAR) exchange rate slump sharply ahead of the weekend.

After threatening to pull the Brexit withdrawal agreement if Labour did not approve his proposed general election Johnson suggested that the UK could still leave the EU at the end of October.

As EU leaders delayed their formal approval of an extension to the current deadline, given the latest bout of UK political uncertainty, the risk of a disorderly Brexit appeared to rise once again.

This dragged the Pound sharply lower across the board on Friday, with this latest political disruption looking set to prolong the sense of economic anxiety that has already dented UK growth.

Hopes of US-China Trade Progress Boost South African Rand (ZAR)

Lingering optimism over the prospect of US and Chinese officials making fresh progress towards a trade agreement helped to shore up the South African Rand, meanwhile.

With market risk appetite finding a fresh wind the risk-sensitive Rand was able to push higher against many of the majors.

Even so, worries over the underlying health of the South African economy still look set to drag on ZAR exchange rates in the coming week.

Anxiety over the outlook of the struggling state power utility Eskom could see the Rand fall out of favour once again, given the negative headwinds already facing the domestic economy.

South African Rand (ZAR) Exchange Rates Brace for Mini-Budget

The upcoming mini-budget may put ZAR exchange rates under significant pressure as markets weigh up the government’s latest spending plans.

Unless investors see signs that economic activity is likely to gain a boost before the end of the year the prospect of a weak quarter of growth could drag the Rand down against its rivals.

Further volatility could emerge on the back of the third quarter South African unemployment rate if the labour market shows evidence of loosening.

Any uptick in unemployment could spook investors, offering the GBP/ZAR exchange rate on Tuesday.

GBP Exchange Rates to Remain Under Pressure Thanks to Political Drama

The ongoing political drama in Westminster looks set to dominate the outlook of GBP exchange rates in the near future.

With the current Brexit deadline less than a week away the Pound may struggle to find any significant support, barring a political breakthrough.

If MPs reject Johnson’s general election this could drag the GBP/ZAR exchange rate lower as markets brace against the risk of further disruption to come.

However, any renewed progress towards a Brexit deal or a confirmed extension of the deadline could offer Pound Sterling a solid boost across the board.

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TAGS: South African Rand Forecasts