GBP/ZAR Exchange Rate Soars as Investors Drop the Rand while Geopolitical Uncertainty Grows
The Pound South African Rand (GBP/ZAR) exchange rate continued to accelerate last week as markets shied away from the Rand in the face of growing global uncertainty.
The ZAR exchange rate was further dented as South Africa faced rolling blackouts, with state-controlled power firm, Eskom, forcing electricity outages due to an ongoing wage dispute with labour unions
This downturn in the Rand helped the Pound appreciate in the first half of last week despite the UK’s latest wage growth and inflation data underperforming.
Sterling was then able to build on these gains at the tail end of the week, with some surprisingly robust retail sales figures bolstering the appeal of GBP.
South African Rand (ZAR) Exchange Rate Plunges as Trade War Fears Rise
The start of this week’s session saw the sell-off of the South African Rand (ZAR) continue at an alarming pace as investors continue to flee emerging market currencies en masse.
The latest slump comes after Donald Trump escalated his trade dispute with Beijing, with the US President threatening to impose tariffs on a further $200bn of Chinese goods.
This comes after Beijing imposed tariffs on $50bn of US imports in retaliation to Trump’s first round of charges on Chinese exports.
While not all analysts believe that this will escalate into a full-blown trade war just yet it has been enough to spook investors, leading them to steer clear of the Rand and other emerging markets.
Shintaro Ikeshima, at Mitsubishi UFJ Trust and Banking Corp, said:
‘The latest headlines from Trump are pushing investors to risk-off mode, although many think this might be another bluff from Trump, markets are likely to stay nervous to trade-related headlines for now.’
Pound South African Rand (GBP/ZAR) Exchange Rate Trims Gains Following Lords Brexit Defeat
At the same time, while the Pound South African Rand (GBP/ZAR) exchange rate is currently up nearly 0.8% this morning, Sterling has been forced to part with some of its gains as Brexit uncertainty re-emerges.
The latest bout of uncertainty comes as the UK government faced another setback in passing its EU Withdrawal bill, after it was blocked by the House of Lords.
The Pound fell as peers voted to amend the bill, adding a formal agreement granting MPs the power to decide how to proceed in the event that the government fails to secure a final deal with the EU.
The amended bill is now set to be debated again by the House of Commons on Wednesday, offering rebel Tories a second chance to hand defeat to Theresa May’s Brexit plans.
GBP/ZAR Exchange Rate Forecast: BoE Rate Decision in the Spotlight: What Impact Will it Have on the Pound?
Looking ahead, movement in the GBP/ZAR exchange rate this week is likely to be dominated by the Bank of England’s (BoE) rate decision on Thursday.
While no policy changes are expected this month, the bank’s forward guidance is likely to face a lot of scrutiny on Thursday as GBP investors look to gauge whether a rate hike in August looks possible.
This could see a sharp uptick in the Pound (GBP) if policymakers appear open to the possibility.
Meanwhile South Africa will publish its latest CPI figures on Wednesday, with an expected surge in inflation possibly undermining the South African Rand (ZAR) if markets fear it is placing too much pressure on consumers.