The Pound crashed against the South African Rand at the start of the week and looks set to remain down due to fresh Brexit fears weighing on GBP.
Demand for the Rand was extremely high on Monday, as investors reacted favourably to a challenge against Jacob Zuma from his own party.
The GBP/ZAR pairing was already on the back foot, having recorded a modest loss over the course of last week despite Sterling exhibiting resilience elsewhere.
Sterling Softness Triggered by Latest Concerns over Brexit Legal Challenge
After deriving support from the Autumn Statement and UK growth data last week, concerns over what legal battles Brexit could entail for the Government have left the Pound softer today.
The latest roadblock in the efforts to trigger Article 50 and leave the EU have concerned access to the EU single market, which is a highly contentious issue.
EU leaders have previously pledged that the UK will not be able to keep single market access without also having loose immigration controls for EU citizens.
With that in mind, lawyers have recently argued that the UK will remain in the single market after leaving the EU by default, which could see another lengthy referendum. The uncertainty this would provoke would keep Sterling pressured.
Rand Soars after ANC Challenge Zuma’s Leadership
The Rand jumped against the Pound on Monday, having been boosted by domestic political developments.
Having previously fought off votes of no confidence from opposition parties, President Jacob Zuma is now facing the prospect of an ANC VONC, which could finally see the controversial leader ousted from Government.
While the ANC VONC is tentative at present, hopes are high that the party will agree to holding a vote, which could well turn against Zuma’s interests, thereby ejecting him from his long-held office.
GBP/ZAR Exchange Rate Forecast
This week, Pound Sterling/South African Rand exchange rate movement may occur as a result of the UK’s GfK consumer confidence result, as well as later manufacturing and construction PMI readings.
While the Pound has been uncoupled from domestic data to a certain extent since Brexit, positive results could still lend GBP some measure of support.
Meanwhile, Rand fluctuations are expected on South African Q4 business confidence, in addition to trade balance and manufacturing data across the rest of the week.
Business confidence for Q4 is forecast to rise from 42 to 44, which could solidify demand for ZAR against the Pound.
Any optimism might be unsettled on Wednesday, however, as the October trade balance is expected to fall into a deficit from 6.7bn to -9.5bn.
Closing off the week on Thursday will be the Barclays manufacturing PMI for November, which is expected to rise from 45.9 to 46.2.
On Monday the interbank GBP/ZAR exchange rate was in the region of 17.2340.