The Pound to South African Rand exchange rate briefly hit a fresh three-year-low of 16.01 on Monday afternoon. It rebounded later in the day however as investors awaited Trump’s Presidential address.
Pound (GBP) Recovers from Lows as Brexit Rumours Fade
Monday saw the Pound slump to multi-year lows against the South African Rand. The Pound plunged against most of its other rivals too as Brexit fears once again dominated headlines.
Rumours flared up at the beginning of the week that Scotland would call for a second Scottish referendum soon after Article 50 is activated and the Brexit process begins.
Other speculation revolved around mutterings that UK Prime Minister Theresa May would cut off EU free movement to Britain as soon as the Brexit process begins.
The prospect of Scotland leaving the UK and the possibility of suddenly losing the flow of EU migrant workers spooked traders and left Sterling trading broadly lower.
However GBP stabilised as government officials indicated a sudden cut off was unlikely and it was remembered that Theresa May would need to greenlight a second Scottish independence referendum.
South African Rand (ZAR) Steady ahead of Trump Speech
Demand for the South African Rand (ZAR) has been solid in recent weeks. Risky emerging-market currencies enjoyed some brief gains on Monday as investors closed US Dollar positions ahead of US President Trump’s Tuesday Presidential address.
The Rand experienced little movement following the publication of Tuesday’s South African ecostats. Private sector credit improved from 5.10% to 5.56% year-on-year in January, while the M3 money supply figure improved from 6.07% to 7.91% in the same period.
GBP/ZAR Forecast: Trump Speech and UK PMIs in Focus
If US President Donald Trump finally details his economic plans during his Presidential address to Congress and impresses investors in the process (upping the odds of a Federal Reserve rate hike) demand for emerging-market currencies like the South African Rand will slump.
The Pound could take point on GBP/ZAR movement later in the week once all the Trump news has been digested and we see the release of the UK’s manufacturing, construction and services PMIs from Markit.
The most influential by far will be the services print, which will indicate how Britain’s most vital economic sector performed in February.
If the UK’s PMI reports impress GBP/ZAR may be able to move further away from its recent multi-year lows.