The value of the Pound / South African Rand exchange rate has fluctuated wildly over the week so far and seems set to continue doing so as the June 23rd EU Referendum vote draws ever closer.
The South African Rand has been making gains against the Pound and other peers in spite of plummeting precious metal prices.
Over the week so far, the Pound has managed to hit a high against the Rand of 21.9461, although the GBP/ZAR pairing has since slipped back to 21.6111.
GBP Shows Resilience as High Hopes Persist for ‘Remain’ Vote
In a marked turnaround from last week, the Pound has managed to triumph against almost all of its peers today, with its faring against the South African Rand being a notable exception.
The UK currency was boosted on Monday when the then-latest polls put the chances of a ‘Remain’ vote in the EU Referendum as being higher than those of a ‘Leave’ outcome – a reversal on the previous batch of poll results.
The fact that the Pound has managed to remain on a bull run for two days in a row is a testament to how clearly investors have linked voting outcomes to their perceived economic impact – an ‘In’ vote has historically been linked to the status quo and stability, while the general opinion is that a vote to leave will be a step into the unknown and thus induce instability for the economy.
In other news, the last piece of UK domestic data before the Referendum has been released – a report relating to governmental borrowing in May.
The result, showing a decrease in borrowing since 2010, has unfortunately also recorded a rise in the UK’s debt to GDP ratio, which is now up to 83.7%.
Rand Rebounds on Continued US Economic Weakness
Although no actual South African data has been released this week, barring some disappointing declines in the cost of gold and copper, the Rand has nonetheless been able to rally against its three closest rivals, the Pound, the US Dollar and the Euro.
Even more spectacular is the fact that the South African currency has managed this feat under the shadow of rising smoke around the nation’s capital, Pretoria, where political unrest and violence has been seen in response to the ruling African National Congress (ANC) party naming a not-nominated former cabinet minister, Thoko Didiza, as its mayoral candidate for the Tshwane municipality.
The Rand actually fared well yesterday, stemming from the fact that the appeal of the US Dollar has been seriously damaged recently due to a number of economists predicting economic harm for the US in the event of a ‘Brexit’.
GBP/ZAR Exchange Rate Forecast
For the rest of the current week, Pound Sterling/South African Rand exchange rate movement may occur as a result of tomorrow’s South African inflation data, late Thursday and early Friday’s EU Referendum results and Friday’s BBA UK loans for house purchases in May.
For South Africa, forecasts have been for a rise across the board for both the base and core inflation results, which will likely further strengthen the appeal of the Rand to investors.
The week’s big event, however, is likely to overshadow the actual outcome of Friday’s UK loans stats.
Current predictions are for the final result of the Referendum to be known at around 7am on Friday, although any reports of declared votes in the meantime are likely to swing opinions among investors notably, which could lead to some dramatic shifts in the value of the Pound on an hourly or even sub-hourly basis.
Based on what most industry experts and economists have been predicting, an ‘In’ vote can be expected to either boost the Pound or at least prevent it falling into a negative range, while an ‘Out’ majority could send Sterling down by at least -15%, according to billionaire investor George Soros.