Positive Barnier Brexit Comments Prompt Sharp Jump for GBP/ZAR Exchange Rate
UPDATE: The Pound Sterling to South African Rand (GBP/ZAR) exchange rate picked up sharply on Wednesday afternoon as fresh comments regarding Brexit hit the wires.
As chief EU negotiator Michel Barnier noted that the EU is prepared to offer the UK ‘a partnership such as there never has been with any other third country’ this encouraged Pound Sterling (GBP) to surge higher across the board.
Hopes that the two sides could soon move towards a deal saw the GBP/ZAR exchange rate trending sharply higher, even though significant progress is still needed.
Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Benefits from SA Land Expropriate Bill Developments
News that South Africa’s parliament has withdrawn its 2016 land expropriation bill has offered the Pound Sterling to South African Rand (GBP/ZAR) exchange rate a leg up.
The scrapping of the bill, which facilitated compulsory state purchases of land, paves the way for the South African government to push forward with plans to expropriate farmland without compensation.
This move naturally sparked considerable alarm among traders, leaving the South African Rand (ZAR) on a weaker footing as fears mounted over the political direction the country is taking.
Furthermore, the threat of a fresh intervention from the Trump administration encouraged investors to pile out of the South African Rand (ZAR) in the wake of the announcement.
As risks of a further escalation in trade tensions between the US and China continue to linger this also helped to limit the strength of ZAR exchange rates.
Brexit Worries Continue to Drag on Pound Sterling (GBP) Exchange Rates
Worries over the threat of a no-deal Brexit are still weighing on the Pound Sterling to South African Rand (GBP/ZAR) exchange rate.
Although Theresa May commented that a no deal Brexit would ‘not be the end of the world’ this failed to provide investors with much confidence.
Even now that the deadline for the conclusion of withdrawal treaty negotiations has been pushed back from October to November the appeal of Pound Sterling (GBP) remains muted.
Fears of the UK crashing out of the EU in March 2019 without a new agreement in place continue to limit the upside potential of GBP exchange rates, with the odds still pointing towards a harder form of Brexit than markets would like to see.
Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Upside to Diminish on Signs of Weakening Consumer Confidence
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is looking to extend its gains on the back of July’s UK net consumer credit and mortgage approvals figures.
Signs that consumer borrowing remained robust at the start of the third quarter would bolster confidence in the outlook of the wider UK economy.
However, forecasts suggest an easing in lending on the month, potentially pointing towards a decline in consumer confidence.
Evidence that domestic sentiment is souring could weigh heavily on the Pound, raising concerns that economic growth could weaken once again in the second half of 2018.
Any decline in the GfK UK consumer confidence index may equally leave GBP exchange rates biased to the downside ahead of the weekend.
Narrowed SA Trade Surplus to Boost GBP/ZAR Exchange Rate
Friday’s South African trade data could offer the Pound Sterling to South African Rand (GBP/ZAR) exchange rate a fresh boost, meanwhile.
Investors expect to see a narrowing of the trade surplus, with June’s ZAR 12bn easing to just ZAR 5.4bn in July.
A weaker showing here would give markets fresh cause for doubt over the outlook of the South African economy, especially as global trade tensions remain elevated.
Unless South African data indicates resilience in the face of rising global protectionism and political risk the mood towards the South African Rand is likely to remain bearish.
Political developments may also continue to provoke volatility for the Pound Sterling to South African Rand (GBP/ZAR) exchange rate over the coming week.