Pound South African Rand (GBP/ZAR) Exchange Rate Muted on New Halloween Article 50 Extension
This morning, the Pound Sterling South African Rand (GBP/ZAR) exchange remains muted, and the pairing is currently trading at an inter-bank rate of R18.1991.
Last night, during the emergency European Council summit, EU leaders granted the UK an extension to Article 50.
On Thursday morning the UK formally accepted the new 31 October Brexit deadline, as UK Ambassador to the EU Sir Tim Barrow wrote to the European Council President Donald Tusk.
The new ‘Halloween’ deadline includes a ‘progress review’ in June.
European Council President Donald Tusk noted that the UK could rethink its Brexit strategy or choose to ‘cancel Brexit altogether.’
However, Sterling showed little reaction following reports the UK had been granted an extension, and commenting on this, Head of Forex at State Street Bank, Kazushige Kaida said:
‘At least there won’t be a no-deal Brexit this month. But while I’m no expert on British politics it seems difficult for the parliament to come to any agreement.
‘They just kicked the can down the road. Once the dust settles, I would expect to see selling in Sterling.’
South African Rand (ZAR) Flat as Business Confidence Continues to Fall
On Wednesday data revealed that March’s South African business confidence slipped to 91.8 from 93.4, making this the fourth consecutive month that this figure has fallen.
Confidence fell to its lowest level since August 2018 when South Africa suffered from the worst power cuts in over a decade.
Last month the country suffered from 10 consecutive days of rolling blackouts as Eskom removed around 4,000 megawatts from the system each day for seven days as the aging, unreliable plants struggled to meet demand.
Despite the South African Rand (ZAR) rising against Sterling over the course of Wednesday, the Pound (GBP) was able to claw back some losses on Thursday.
Pound Sterling (GBP) Muted as UK Manufacturing Rises to Decade-High
Wednesday’s better-than-forecast data which showed that GDP rose by 0.2% despite market expectations that the UK’s economy would remain stagnant.
However, the Pound (GBP) remained muted against the South African Rand (ZAR) on Thursday.
February’s rise combined with January’s unusually strong gain of 0.5% suggests that the UK economy may have expanded by around 0.4-0.5% in Q1 2019.
On an annual basis, in the quarter leading to February GDP rose by 2%, the highest rate of growth since late 2017.
Meanwhile, UK manufacturing surged by 0.9% largely due to nervous companies stockpiling ahead of Brexit driving growth.
Manufacturing levels are now at its highest since April 2008.
Pound South African Rand Outlook: Will the GBP/ZAR Exchange Rate Slide as ZA Manufacturing Rises?
Later this morning, the South African Rand (ZAR) may rise against the Pound (GBP) following the release of the South African Manufacturing Production Index.
If manufacturing rises by 0.5% or more in February compared to the previous rise of 0.3%, the Rand could receive an upswing in support.
The Pound could rise following further cross-party talks between Labour and the Conservatives with the aim of breaking the current Brexit deadlock in Parliament.
If government ministers are able to reach a compromise during discussions with Labour, it is likely the Pound South African Rand (GBP/ZAR) exchange rate will rise.