The Pound to South African Rand exchange rate fell on Tuesday morning as investor demand for risky currencies increased while Sterling was weighed down by persistent Brexit fears. The interbank GBP/ZAR exchange rate briefly fell to a low of 16.21 on Monday but had climbed back above the week’s opening levels by the close of trade.
Pound (GBP) Benefits from Prime Minister’s Brexit Speech
Despite plummeting at the beginning of the week due to fears that the UK government would confirm that it would not fight for access to the EU single market during Brexit negotiations, the Pound performed well immediately following a Brexit speech from UK Prime Minister Theresa May.
During the speech, May reconfirmed that the UK government would put a vote to Parliament on the final Brexit deal towards the end of negotiations. May also stated that the UK can decline a bad deal altogether and continue to work for a better one over time.
As a result, the Pound surged as markets hoped for a good trade deal to replace single market access. However, Sterling trade remained volatile.
South African Rand (ZAR) Benefits from Increased Risk-Sentiment
Demand for risk-correlated currencies like the South African Rand (ZAR) improved on Tuesday, largely because the US Dollar (USD) was sold off ahead of this week’s upcoming Donald Trump inauguration.
With US uncertainty high, investors piled into risky currencies once more seeking out their higher yields, knowing that the Trump Presidency has the potential to destabilise risk factors like global trade.
The Rand remained sturdy against most rivals on Tuesday despite losing ground to GBP. Underwhelming South African mining production results also restrained the Rand to a certain extent.
GBP/ZAR Forecast: Sterling Readjustments Expected
Due to the interest around Tuesday’s Brexit speech from UK Prime Minister Theresa May, its after-effects are likely to linger for the remainder of the week.
The main rallying point for Sterling on Tuesday was the news that UK Parliament would get a vote on the final Brexit deal.
But investor optimism towards the Pound would improve if the UK Supreme Court upholds the High Court’s ruling that the activation of Article 50 must be ratified by Parliament.
Wednesday’s UK data will include December jobless claims as well as November’s UK unemployment results.
As for the South African Rand, shifts in risk-sentiment as well as Wednesday’s South African inflation results will be the primary causes of movement.
With the inauguration of US President-elect Donald Trump taking place on the 20th of January, demand for risky emerging-market currencies like the Rand is likely to ease – giving the Pound a chance to climb.