Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Rebounds on UK Political Developments

Pound to South African Rand Exchange Rate Punches Higher as UK Prime Minister Surviving No-Confidence Vote

As the Pound (GBP) climbed against most major rivals on Wednesday, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate continued to punch higher today despite better risk-sentiment bolstering demand for the South African Rand (ZAR).

GBP/ZAR remains well above last week’s lows with the pairing’s recent losses slowing on Wednesday as news that UK Prime Minister Theresa May had survived a no-confidence vote from her Conservative Party colleagues left the Pound more appealing to traders again.

Stronger South African data as well as cooling US-China trade tensions have boosted risk-sentiment, limiting the Pound’s gains, however.

Pound (GBP) Exchange Rate Strength Limited as Brexit Concerns Persist

Some investors opted to buy the Pound (GBP) on Wednesday on bets that UK Prime Minister Theresa May would smoothly see off a no-confidence vote that had been activated against her by her Conservative Party.

Nevertheless the Pound’s appeal remained limited as May still appeared to face notable opposition within her own party, as well as from the opposition parties, with 117 Conservative MPs voting against her.

According to Roberto Cobo Garcia, Currency Strategist at BBVA, the vote also highlighted the fact that some Brexit uncertainties were unlikely to fade any time soon:

‘The vote confirmed that the Conservative party is divided and that there is no Parliamentary majority for May to pass the deal if she does not get support from some Labour MPs,

Sterling’s appreciation will only have longer legs if an orderly Brexit or even a Bremain are assured.’

South African Rand (ZAR) Exchange Rates Climb on Risk-Sentiment

As well as the latest UK political developments, Wednesday saw what appeared to be some optimistic developments in US-China trade negotiations.

Despite the worsening US-China trade tensions last week, de-escalation appeared to be going ahead, bolstering market hopes that further progress in relations between the nations was on the way.

Chinese officials indicated that the nation would slash its tariffs on imports of US cars. China also made its first major import of US soybeans in around half a year.

However, the Pound to South African Rand (GBP/ZAR) exchange rate edged higher on Thursday as markets bet that the Reserve Bank of South Africa (SARB) would likely not hike interest rates again until around May.

Pound to South African Rand (GBP/ZAR) Exchange Rate Recovery Unlikely Without Brexit Developments

The Pound to South African Rand (GBP/ZAR) exchange rate is still on track to slip this week, especially if US-China trade tensions continue to be perceived as lightening, or there are more signs of trade war de-escalation.

This news would keep the risk-sensitive South African Rand (ZAR) buoyed, as investors would become more hopeful that global growth would be resilient.

The Pound (GBP) may have a better chance of recovering if there are any optimistic Brexit developments.

Politicians and economists are still highly uncertain about how the Brexit process will unfold, with May’s Brexit deal still lacking in support from MPs.

Any signs that a ‘no-deal Brexit’ or general election is becoming more likely could drag the Pound lower. However, speculation that a second EU referendum is possible may boost Sterling demand.

No notable UK or South African data is due for publication before the end of the week. Next week, UK inflation and Bank of England (BoE) news could influence the Pound to South African Rand (GBP/ZAR) exchange rate, on top of any potential Brexit developments.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard