Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Slumps as Trump Pushes Back Against Brexit Plan

Trump’s Criticism of Brexit Deal Drags Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Down

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate came under fresh pressure as a result of criticism by US President Donald Trump of the proposed Brexit deal.

His comments poured cold water over Pound Sterling (GBP) this morning as Theresa May continued to struggle to shore up support for the proposal among MPs.

As Trump’s comments cast doubt over the potential for a smooth US-UK trade deal demand for the Pound weakened sharply.

A persistent sense of uncertainty over the UK’s future trade relations continues to weigh heavily on the minds of investors, with time fast running about before the March 2019 Brexit deadline.

Weaker Business Confidence Index Fails to Weigh Down South African Rand (ZAR)

Although the fourth quarter South African business confidence index weakened from 38 to 31, this was not enough to boost the GBP/ZAR exchange rate.

This modest weakening in sentiment suggests that the South African economy remains under pressure heading into the end of 2018, limiting the upside potential of the South African Rand (ZAR).

ZAR exchange rates also came under pressure as a result of the latest bout of market jitters over the global trade outlook.

With the US and China looking set to remain at odds over trade for the foreseeable future the appeal of the risk-sensitive Rand naturally diminished.

Even so, with Brexit worries dominating the outlook of the Pound this has failed to prevent the GBP/ZAR exchange rate from trending lower this morning.

Improved UK Borrowing Data may Encourage GBP/ZAR Exchange Rate Recovery

A rallying point could be in store for the Pound, however, if Thursday’s raft of UK mortgage approvals and consumer credit data proves encouraging.

Evidence of increased borrowing would suggest a greater degree of confidence in the domestic economy, giving investors fresh incentive to buy into GBP.

However, a significant uptick in unsecured household credit may give Bank of England (BoE) policymakers cause for concern.

As higher levels of household debt could discourage the BoE from raising interest rates again in the near future this could put downside pressure on the Pound.

If parliamentary support for Theresa May’s Brexit plan remains elusive this is also likely to keep the GBP/ZAR exchange rate on the back foot in the days ahead.

South African Rand (ZAR) Exchange Rates Vulnerable to Trade Deficit Developments

Confidence in the South African Rand could diminish further, meanwhile, on the back of Friday’s trade balance data.

Any widening of the trade deficit would highlight the continued vulnerability of the South African economy, weighing down ZAR exchange rates ahead of the weekend.

On the other hand, a narrowed deficit would encourage greater confidence in the underlying health of the domestic economy.

While markets remain wary of the prospect of another disappointing quarter of economic growth any signs of improvement are likely to give the South African Rand a solid boost against its rivals.

However, as long as trade relations between the US and China continue to deteriorate this should help to limit the potential losses of the Pound Sterling to South African Rand (GBP/ZAR) exchange rate.

Hannah Wilson

Contact Hannah Wilson