Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Fluctuates as Brexit Debate Kicks Off

Pound to South African Rand (GBP/ZAR) Avoids Losses as Trade Tensions Weaken Rand

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate has steadied since last week as investors anticipate today’s major UK parliamentary debate and vote. At the same time the South African Rand (ZAR) has weakened today on fresh global trade jitters.

Shifts in risk-sentiment limited last week’s GBP/ZAR gains, but the pair still climbed from R17.85 to R17.98 throughout the week.

Since markets opened yesterday, GBP/ZAR has fluctuated, although the pair is still trending above the week’s opening levels due to weakness in emerging market currencies such as the Rand.

Market hopes that the formal Brexit date could be delayed thanks to a tabled amendment have driven the Pound (GBP) higher over the past week, but the currency has steadied amid uncertainty regarding whether such an amendment will actually pass.

As investors anticipate today’s Brexit debate, they have sold the South African Rand partially due to revived tensions between the US and China.

Pound (GBP) Exchange Rate Movement Limited as Investors Anticipate Brexit Developments

Pound (GBP) movement was volatile yesterday, and that movement is expected to continue through much of today as investors anticipate major Brexit developments.

Though the bill is not being voted on yet, markets hope that the debates and amendments to be held today will give the government a stronger hand in reforming the bill in order to make it more popular.

For example, an amendment drafted by Conservative MP Graham Brady would call for the controversial Irish backstop to be replaced with an alternative way of avoiding a hard border in Ireland.

While the EU has said it will not change its stance on the backstop, there are hopes that if Brady’s amendment passes the UK government will be able to show the EU that there is parliamentary support for a change in the plan.

Other popular amendments include ones to potentially delay the formal Brexit date, and one to give lawmakers the power to propose Brexit debates in Parliament rather than giving the government priority.

South African Rand (ZAR) Exchange Rates Dip on Renewed US-China Trade Tensions

The South African Rand (ZAR) is highly sensitive to news regarding global trade, and as a result, it has weakened on the latest US-China trade tensions.

Despite hopes that US-China relations were improving and negotiations were going well, markets perceived tensions flaring up again today in reaction to news that the US Justice Department had filed criminal charges against Chinese tech firm Huawei.

Huawei is being hit with multiple charges including bank fraud and the obstruction of justice.

China quickly retaliated against the charges, calling them ‘unfair and immoral’. Due to Huawei’s importance on the global stage, the move was seen as likely to worsen US-China trade relations.

According to some analysts, these criminal charges on Huawei could actually ruin US-China trade negotiations this week. Jasper Lawler from London Capital Group said:

‘The timing of the move is important. With trade due to start tomorrow, this is a fairly hostile message that the US is sending out. The overriding fear is that this move will negatively impact trade talks, making a deal even less likely.’

Pound to South African Rand (GBP/ZAR) Exchange Rate Traders Anticipate Brexit Developments

Political developments could leave the Pound to South African Rand (GBP/ZAR) exchange rate shifting direction notably over the coming days, as Brexit developments and US-China trade negotiations are expected.

By the end of today’s session, Pound (GBP) investors may have a better idea of how the Brexit process could proceed from here – especially if any of today’s notable amendments find strong support in Parliament.

If there are any stronger signs that the government’s Brexit plan could gather the support needed to pass, or if the chances of a delay to the Brexit process are perceived as becoming more likely, the Pound could see stronger demand later in the week.

The South African Rand (ZAR), on the other hand, will react to upcoming US-China trade negotiations. Set to resume on Wednesday, the Rand could be in for further losses if tensions between the nations worsen.

Other factors that could impact risk-sentiment, including Federal Reserve news and commodity trade, which could also influence the Pound to South African Rand (GBP/ZAR) exchange rate.

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