Pound Rand (GBP/ZAR) Exchange Rate to Rally on Brexit Deal Rejection?
The Pound (GBP) is currently trending in a narrow range against the South African Rand (ZAR) and the majority of its other peers this morning as markets brace for this evening’s long-awaited vote on the government’s EU withdrawal deal.
Observers currently predict that the vote will end in a convincing defeat for the government, potentially weakening GBP exchange rates as a rejection of the only deal on the table will result in greater uncertainty over the whole Brexit process.
However some analysts believe that a rejection of May’s deal this evening will prove positive for the Pound.
Strategists at Macquarie Bank suggest:
‘At first glance that might sound like bad news for Sterling, yet such a resounding defeat is universally expected, and will open doors to many alternative paths, most of which would be good for the Pound.’
Some of these alternative options include extending the two-year Article 50 negotiation period or even revoking it all together, both of which would be welcomed by markets.
— ING Economics (@ING_Economics) January 14, 2019
Last Week: GBP/ZAR Exchange Rate Fluctuates on Brexit Uncertainty
The Pound South African Rand (GBP/ZAR) exchange rate was hit by volatility throughout last week’s session, much of it due to renewed Brexit uncertainty as Theresa May confirmed a meaningful vote of her Brexit deal would take place on 15 January.
Meanwhile the Rand initially got off to a poor start last week as weak Chinese manufacturing data renewed fears of a global slowdown and slashed market risk appetite.
However ZAR then pushed higher in the middle of the week as a dip in the US Dollar (USD) on the back of some dovish signals from the Federal Reserve saw investors willing to buy riskier assets once again.
While this resulted in Sterling trending lower throughout the week, the GBP/ZAR exchange rate then rallied sharply at the very end of the week as the Pound was bolstered by reports that Brexit may be delayed due to the legislative timetable appearing unachievable.
GBP/ZAR Exchange Rate Forecast: Sterling Volatility ahead as Brexit Anxiety Continues
Looking ahead, while the upcoming vote on Theresa May’s Brexit deal is likely to dominate the Pound South African Rand (GBP/ZAR) exchange rate during the first half of the week, the rest of the session may see investors turn their eyes towards the South African Reserve Bank (SARB) as it hold its first policy meeting of 2019.
After raising interest rates in November for the first time since March 2016, the SARB is expected to leave rates on hold this month.
However investors will be focused on whether the recent hike will be the start of a new tightening cycle or just a one-off, with the Rand likely to weaken if it proves to be the latter.
In the meantime the release of the UK’s latest CPI figures may also influence the GBP/ZAR exchange rate this week, with a drop in inflation potentially dragging on Sterling.