The interbank Pound to South African Rand exchange rate has remained around the 17.20 level so far this week, with Wednesday’s UK ecostats doing little to boost support for the Pound.
Pound (GBP) Weakened by Public Borrowing Stats
Sterling has slumped this week with pre-holiday trade slowing and optimism of a good UK-EU single market deal waning again.
The first news to weaken Sterling this week was the indication that the UK government was hesitant to continue paying the European Union for benefits after leaving, despite previously hinting that it was possible.
UK Prime Minister Theresa May also refused to confirm that Parliament would be given a vote on the Brexit plan, which weakened hopes of post-Brexit single market access further.
On Wednesday, UK markets were also highly disappointed with Britain’s November public sector net borrowing results, which came in at a worse than forecast 12.2b and brought the national debt up to £1.655trillion – a new record high.
South African Rand (ZAR) Sold from Highs Following Tuesday Rally
The South African Rand increased in strength on Tuesday, largely due to quieter year-end trade and an upbeat global equity market. The Rand has also been recovering from the risk-off movement that followed last week’s Federal Reserve news.
This has been despite a lack of fresh domestic news for South Africa this week and higher oil prices, which typically weaken demand for emerging-market currencies like the South African Rand.
While the Rand has fallen slightly from the week’s best levels, it continues outperforming GBP.
GBP/ZAR Forecast: Trade to Quieten as 2016 Draws to an End
Further GBP/ZAR movement may be limited as Britain and South Africa’s economic calendars both have a quiet week ahead of them, although Thursday’s UK data includes GfK’s December consumer confidence results.
Friday’s data will be a little more influential, including Britain’s final Q3 Gross Domestic Product (GDP) results and the final Q3 total business investment figures.
South Africa, on the other hand, won’t see any fresh datasets published until next Monday’s Q4 consumer confidence figures; when most western markets will be closed to observe the various public holidays of the 26
th
of December.
For the most part, the Pound to South African Rand exchange rate is expected to react to global risk trends for the remainder of the year. However, it’s likely GBP/ZAR will see bearish underlying trends as risk-sentiment recovers from last week’s Fed news and the UK’s public borrowing figures keep Sterling pressured.