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Support for PM’s Brexit Deal Sends Pound South African Rand (GBP/ZAR) Exchange Rate 1% Higher

November 18, 2019 - Written by John Cameron

Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Rallies on UK Election Optimism

The Pound Sterling South African Rand (GBP/ZAR) exchange rate jumped over 1% this afternoon, leaving the pairing trading at around R19.1381.

Sterling rallied at the start of the week as the chance of Prime Minister Boris Johnson’s deal being passed through parliament increased.

The Prime Minister announced that all 635 Conservative party candidates for the 12th December election were supportive of his Brexit Withdrawal Agreement Bill.

Added to this, the chance of him securing a Tory majority increased as the Brexit Party announced further candidates had stepped down.

Nigel Farage’s Brexit Party stood down in a further 43 non-Conservative seats, 11 of which are currently held by Labour MPs and 17 that saw Tory members finish second in the previous election.

The Pound rallied against the Rand as markets saw this as increasing the chances of Boris Johnson securing a majority.

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

‘Market’s just moving to price in a higher likelihood of a majority for the Tories.

‘We’ve had the opinion polls at the weekend generally all showing increasing support for the Tory party, making the market more confident they could win a majority, seen as more favourable in the short term.’

South African Rand (ZAR) Slumps Ahead of SARB Decision

The South African Rand was left under pressure as investors awaited for further developments in US-China trade negotiations as well as clues on monetary policy from the South African Reserve Bank (SARB).

On Thursday, the central bank is expected to leave rates unchanged at 6.5%, and commenting on this, senior research analyst at FXTM, Lukman Otunga said:

‘Given how trade uncertainty and global growth fears have encouraged central banks across the globe to ease monetary policy, all eyes will be on the South African Reserve Bank’s rate decision later in the week.

‘Should the SARB adopt a cautious stance and express concerns over the South African economy, the Rand will be thrown in the direct firing line.’

Meanwhile, the Rand was left under pressure despite Chinese state media reporting at the weekend that the US and China had ‘constructive’ trade talks.

Pound South African Rand Outlook: Will US-China Tensions Weigh on ZAR?

Looking ahead, the Pound (GBP) could edge higher against the South African Rand (ZAR) as the 12th December election gets closer.

If election optimism continues to increase, and Boris Johnson’s Conservative Party continues to remain ahead in the polls, Sterling is likely to rise.

Meanwhile, US-China trade tensions are likely to weigh on the risk-sensitive South African Rand over the course of the week.

If reports suggest Washington and Beijing are further from making a trade deal, risk appetite could slump, causing the Pound South African Rand (GBP/ZAR) exchange rate to rise.

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