With a particularly quiet domestic data docket this week, South African Rand exchange rates are likely to see movement in response to political uncertainty and commodity price shifts.
Rand Struggles on Safe-Haven Demand
As a new week of trading began, the Rand softened versus most of its major peers after falling crude prices weighed on demand for emerging-market assets. Crude oil prices fell significantly after Saudi Arabia and Iran failed to agree to the terms of a production freeze.
In addition, ZAR continues to struggle against political uncertainty. Since President Jacob Zuma was found guilty of violating the constitution by using public funds to improve his private home, calls for his resignation have increased significantly.
Zuma’s rule had already been called into question after some ill-advised appointments and suspicion that he allowed the Gupta family to advise on cabinet posts in exchange for business concessions.
Even if Zuma is ousted, finding his successor may not be a simple task. Many in the know had predicted that Zuma’s ex-wife Nkosazana Dlamini-Zuma would take the helm after Zuma’s term of office ended, but her ex-husbands exploits have not set her in good stead with an angry public.
GBP/ZAR Climbs despite EU Referendum Jitters
The Pound softened versus most of its major peers on Monday despite average house prices reaching a record-high. The dampened demand for Sterling is mostly the result of ongoing uncertainty with regards to the EU referendum.
On Monday Chancellor George Osborne outlined the potential risks of a ‘Brexit’, stating that the poorest in the country will be the most affected. This did not encourage demand for the Pound, however, as Osborne’s unpopularity is thought to be detrimental to the ‘in’ campaign.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate managed to make a modest gain on Monday thanks to damp market sentiment.
South African Inflation Data to Provoke GBP/ZAR Volatility
Over the coming week the data docket is somewhat sparse for both the UK and South Africa. With that in mind, political developments will likely be the driving force for both the Pound and the South African Rand this week.
With that said, however, Wednesday could see significant GBP/ZAR exchange rate volatility in response to South Africa’s inflation data. If consumer prices continue to climb then inflation will exceed the South African Reserve Bank’s (SARB) target, which could result in policy adjustments.
Wednesday will also see British labour market data published. If average earnings improve the Pound may find some near-term support. However, EU referendum uncertainty is likely to limit any Sterling gains.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate was trending within the range of 20.6220 to 20.8580 during Monday’s European session.
Heads Up
Summary of major upcoming data releases that we think may move the market.