The Pound dropped -0.5% against the Rand on Monday but could bounce back if the government makes a long-awaited announcement.
Sterling exchange rates have been putting in a mixed performance since markets reopened after the weekend, with the Pound struggling against the Rand but gaining on the US Dollar and Euro.
GBP fluctuations have been caused by news that Democratic Unionist Party (DUP) leader Arlene Foster is meeting with UK Prime Minister Theresa May.
Hopes that the two leaders will come to an agreement and form a working minority government are rising, but there are still roadblocks to be navigated.
While the thought of a Conservative/DUP working relationship isn’t popular with everyone, if the UK establishes some kind of political stability this week (nearly three weeks after the general election) the Pound could gain.
Rand Advances on Hopes of Secret Ballot against President Zuma
The Rand’s recent rise against the Pound has also been driven by South African political motivations.
The biggest news is that there is still a chance of a secret vote of no confidence being conducted against President Jacob Zuma.
The issue at present is that the National Assembly Speaker, Baleka Mbete, has yet to decide whether to allow the vote or not. She faces a difficult decision, as in addition to being speaker, she is also a member of the African National Congress (ANC), the ruling party that Zuma is President of.
Commenting on Mbete’s indecision has been ANC Deputy President Cyril Ramaphosa;
‘[Mbete] can’t hide behind the veil of saying “I don’t have the power”. So it’s good when we clarify things in our country so that an independent institution like the Constitutional Court clarifies it and decides it for us’.
Ramaphosa’s statement refers to a previous court ruling that means Mbete can decide on the vote’s status, after she previously attempted to avoid making such a decision.
GBP/ZAR Forecast
This week, Pound/Rand exchange rate movement may occur following the Bank of England’s (BoE) report on Tuesday, as well as UK confidence and GDP stats on Friday.
The tone adopted by the BoE may inspire GBP fluctuations, with hints that the central bank plans to keep monetary policy accommodative for longer potentially weighing on the Pound.
Looking to the end of the week, the GfK consumer confidence score is predicted to show a decline in sentiment. This, along with a predicted drop for Q1 UK GDP, may send Sterling lower before the weekend.
South African news includes June’s manufacturing data and trade balance stats for May.