The Pound to South African Rand exchange rate fell on Thursday, extending the pair’s worst levels since the US election in November as emerging market currencies benefitted from a US Dollar selloff. GBP/ZAR has fallen almost half a Rand in value since markets opened on Monday and now trends near 16.80 on the interbank market.
Pound (GBP) Slumps on Persistent Brexit Concerns
Demand for the Pound has been weak since halfway through December with 2017 looming and investors focusing on the reality that the Brexit process will likely begin in just three months.
Concerns have also been growing about Britain’s future in the European Union’s single market, especially after last week’s news that only one EU member state would have to veto a post-Brexit UK-EU trade deal in order to block it completely.
This week’s UK data has been unable to offer the Pound any fresh support. BBA’s November home loan results worsened to 40,659 while December’s Nationwide house price figures improved to 4.5% year-on-year.
As this data was too light to support the Pound and Britain’s economic activity is forecast to decline in 2017, investors have seen little reason to buy Sterling this week.
South African Rand (ZAR) Benefits from US Dollar (USD) Weakness
The South African Rand was hit significantly after the election of Donald Trump in November amid concerns that US-Africa trade would be threatened by his leadership.
However, as the US Dollar has weakened over the last week, the South African Rand has been able to recoup some of its losses despite a lack of fresh supportive ecostats.
The Rand has also benefitted from commodity news this week, as prices of gold and other metals increased.
However, the Rand’s gains were slightly restrained on Thursday afternoon as South Africa’s November trade balance printed at a worse than expected -1.1bZAR.
GBP/ZAR Forecast: Rand Could Reverse Gains if USD Strength Returns
While the Pound is likely to continue performing poorly in the coming weeks and months as the beginning of the Brexit process draws closer, the risky South African Rand is also expected to be volatile.
With President-elect Donald Trump taking office on the 20th of January, the Rand is likely to weaken again with investors reverting to ‘safe havens’ to avoid potential market turbulence.
The Rand may also be weakened if prices in oil continue increasing. South Africa often benefits from cheaper oil imports, so OPEC’s oil output cap plans could have a long-term downside effect on ZAR if they bear fruit.
The coming week’s UK data may boost the Pound if it beats expectations. Economic activity is predicted to drop in Britain’s December PMIs but if they don’t Sterling may hold its ground for a little longer.
South African data is likely to be too low-influence to affect ZAR exchange rates, but investors will be keeping an eye on shifts in risk-sentiment and the US Dollar however.