Pound South African Rand (GBP/ZAR) Exchange Rate Rises as Risk Appetite Eases
The Pound Sterling South African Rand (GBP/ZAR) exchange rate rose today, and the pairing is currently trading at an inter-bank rate of R18.5366.
Earlier in the session, the Rand slipped to a three-week low against the safe-haven US Dollar as risk appetite diminished.
In a note, Nedbank analysts wrote:
‘Against a backdrop of a firmer USD, the local unit [ZAR] has traded weaker as offshore demand for USD has outweighed supply.
‘Various factors – including a steadily increasing crude oil price, apparent concerns regarding the financial state of electricity utility and the impending local elections – are weighing on the local unit.’
This meant the Pound has been able to take advantage of the weakness of the risk-sensitive South African Rand.
South African Rand (ZAR) Slides on Falling Consumer Confidence
On Wednesday data revealed that South African consumer confidence slipped further during Q1 2019.
This suggested that the majority of consumers are neither optimistic nor pessimistic about the outlook for South Africa’s economy.
Factors such as prolonged labour strikes, sharp fuel price hikes, falling Rand exchange rates, and increases in personal income tax were cited as hitting confidence levels.
Commenting on the deteriorating consumer confidence, RNB Chief Economist Mamello Matikinca-Ngwenya said:
‘The shock implementation of stage 4 load-shedding by Eskom during February and March no doubt had a very detrimental impact on the South African economy and it is therefore not surprising that consumers are becoming especially concerned about our economic prospects.’
Sterling (GBP) Rises despite Fading Hopes of Brexit Breakthrough
Pressure continues to build on Prime Minister Theresa May to come up with a Brexit plan as cross-party discussions seem to have stalled.
Despite fading hopes of a breakthrough, the Pound (GBP) continued to rise against the South African Rand (ZAR) on Wednesday.
Reports yesterday suggested that the Prime Minister could be planning to bring her Brexit withdrawal agreement before the House of Commons for a fourth time.
The reports suggest that this fourth ‘meaningful vote’ could take place next week.
However, it is likely the Prime Minister’s deal will be rejected by MPs for the fourth time, which could cause further Brexit pessimism and dampen sentiment in Sterling.
Pound South African Rand Outlook: GBP/ZAR to Remain Sensitive to Risk Appetite and Brexit Developments
Looking ahead to Thursday morning, the South African Rand (ZAR) could rise against the Pound (GBP) following the release of the South African Producer Price Index (PPI).
If PPI rises higher than forecast in March, the Rand could receive an upswing on support.
The Pound could face further pressure over the rest of this week as MPs are calling for a rule change so an early motion of no-confidence can be brought against the Prime Minister.
If there are further reports suggesting a vote of no-confidence could occur in June, the Pound South African Rand (GBP/ZAR) exchange rate could slide on further Brexit uncertainty.