Pound to South African Rand (GBP/ZAR) Exchange Rate Struggles to Hold Best Levels as Rand Strengthens
Demand for the Pound (GBP) briefly jumped this morning, but due to some weak UK data and resilient market demand for riskier currencies the Pound Sterling to South African Rand (GBP/ZAR) exchange rate’s gains have been limited.
Due largely to Brexit speculation, GBP/ZAR saw a large boost in demand last week and gained around half a Rand.
This morning, GBP/ZAR briefly touched on its best 2019 levels and its best levels since October. At the time of writing though, GBP/ZAR was trending closer to the week’s opening levels.
Fresh hopes for a soft Brexit, or even a second referendum, supported further Pound gains. Meanwhile though, GBP/ZAR’s strength was limited by poor UK data and market risk-sentiment.
Pound (GBP) Exchange Rate Appeal Limited by Construction Contraction
The Pound (GBP) is trending near its best levels in months due to rising hopes that the UK will avoid a worst-case scenario no-deal Brexit and instead see a soft Brexit or even possibly a second referendum of some kind.
Markets are confident that even if UK Prime Minister Theresa May’s Brexit deal is blocked by Parliament again, MPs will vote against a no-deal and vote in favour of an extension to the formal leaving date.
Brexit hopes rose further today, on signs that positions against May’s deal may be softening.
The opposition Labour Party’s plans to put a whip on its second referendum amendment also supported Sterling amid hopes that a second referendum was becoming more likely.
However, demand for the British currency was limited by Monday morning’s UK construction PMI, which unexpectedly fell into contraction. The figure printed at 49.5 in another sign that Brexit uncertainty was having a negative impact on British economy activity.
South African Rand (ZAR) Exchange Rates Avoids Losses on Risk-Sentiment
Despite the South African Rand’s (ZAR) poor performance in recent weeks, the currency was able to avoid further losses versus the Pound this week so far thanks to resilient market demand for riskier assets.
The South African Rand is a risk sensitive currency, so it benefits more when investors are more willing to take risks.
As a result, market optimism that the US and China were getting closer to striking a deal on trade following a year of tensions bolstered market demand for ZAR.
It follows poorer performance last week, when the Rand failed to benefit from risk-sentiment due to disappointing South African manufacturing data and trade stats.
Pound to South African Rand (GBP/ZAR) Exchange Rate Investors Anticipate South African Growth Stats
With the fate of the Brexit process uncertain until the government’s Parliamentary Brexit vote on 12 March, the Pound to South African Rand (GBP/ZAR) exchange rate is more likely to be driven by South African data in the coming sessions.
Tuesday will see the publication of South Africa’s highly anticipated Q4 Gross Domestic Product (GDP) growth rate stats.
South African growth is expected to have slowed to 1.8% quarter-on-quarter, and to just 0.6% year-on-year following a disappointing 2018.
If the growth stats disappoint investors, it will be easier for the Pound (GBP) to sustain further gains versus the South African Rand (ZAR).
South African business confidence data from SACCI on Wednesday, as well as Britain’s services PMI on Tuesday, could also influence the Pound to South African Rand (GBP/ZAR) exchange rate.