South African Rand News and Forecast: Political Upheaval Triggers Dramatic GBP/ZAR Exchange Rate Movement

Brexit Developments Trigger GBP ZAR Exchange Rate Volatility

The Pound South African Rand (GBP ZAR) exchange rate experienced significant fluctuations last week as Sterling experienced chaotic trading in reaction to the latest Brexit developments.

Not even the finalisation of the UK’s exit agreement was enough to stabilise the pairing last week as Sterling fell on rumours that trade talks would not begin this year as hoped.

Meanwhile, the Rand experienced a spike in the first half of the session as South Africa’s Deputy President Cyril Ramaphosa took the lead in the ANC leadership race.

Markets welcomed the news as he is seen as a more stabilising influence than his main rival Nkosazana Dlamini-Zuma, the ex-wife of controversial President Jacob Zuma, who will step down as leader later this month.

GBP Exchange Rates Fluctuate as UK Inflation Strikes New Five-Year High

The volatility seen in the Pound last week appears to be continuing this week as investors react to the UK’s latest CPI figures.

According to data released by the ONS, UK inflation rose from 3% to 3.1% in November, beating expectations it would remain flat and reaching its highest levels since March 2012.

However, the reaction to the data was mixed, with some hoping it would strengthen calls for further rate hikes from the Bank of England (BoE), and others fearing that it would place even more pressure on UK consumers.

This volatility persisted later in the day as well as the European parliament’s coordinator, Guy Verhofstadt, suggested that David Davis had damaged trust in the UK following his recent comments regarding the possibility of the UK reneging on its exit agreement.

South African Rand (ZAR) Weakened by Drop in Risk Sentiment

At the same time the South African Rand has struggled to strengthen today as emerging-market currencies lose appeal ahead of an expected rate hike from the US federal Reserve later this week.

However, helping to offset this was an unexpectedly strong rise in South Africa’s latest manufacturing production data, as factory output soared from -1.7% to 2.2% in October against expectations of a more modest rebound to 0.75%.

GBP ZAR Exchange Rate Forecast: UK Wage Growth to Surge?

Looking ahead, the GBP ZAR exchange rate may tick higher on Wednesday as the UK publishes its latest employment figures, with economists forecasting that tomorrow’s data will show both a drop in unemployment in October and an uptick in wage growth over the same period.

However, possibly denting Sterling in the second half of the week will be the BoE’s latest rate decision, with investors fearing that policymakers will remain dovish towards the possibly of raising interest rates in 2018.

Meanwhile, the South African Rand may dip on Wednesday as a predicted drop in domestic inflation is likely to dampen the chances of a rate hike from the South African Reserve Bank (SARB).

Hannah Wilson

Contact Hannah Wilson