Pound to South African Rand (GBP/ZAR) Exchange Rate Rallies as SA Political Jitters Persist

Pound South African Rand (GBP/ZAR) Exchange Rate Rises despite Risk of No-Deal Brexit

The Pound Sterling South African Rand (GBP/ZAR) exchange rate rallied by 0.6% today, and the pairing is currently trading at an inter-bank rate of R18.7292.

UK Conservative Party leadership candidate James Cleverly has stated that not delivering Brexit at all would be ‘significantly more damaging’ than no-deal.

Speaking to BBC Radio 4’s Today programme, Cleverly stated that if Brexit was not delivered his party’s political reputation would be damaged further.

Meanwhile, currency markets are now concerned that Prime Minister Theresa May’s successor will have less time to negotiate another Brexit deal.

This dampened sentiment in Sterling, as the risk of a no-deal Brexit increased.

South African Rand (ZAR) Slides as Investors Eye Political Storm

Meanwhile, the Rand (ZAR) slipped to its lowest levels in close to eight months as investors fretted about SA cabinet appointments.

On Tuesday, Deputy President David Mabuza was sworn in as a lawmaker, raising the prospect of corruption allegations which have dented the popularity of the African National Congress’s (ANC) support.

Commenting on this, Cristian Maggio of TD Securities said:

‘With the political environment and the government’s aim to fight against corruption now questioned by the Mabuza news, ZAR will likely struggle further in the near term.’

South African Consumer Confidence Recovers

On Wednesday, data revealed that consumer confidence in South Africa had recovered during the second quarter of 2019.

Confidence rose after the general election delivered a victory for the ANC, and on hopes that the power grid had become more stable, rising to 5 from 2 in Q1 2019.

However, it is expected that consumer spending will remain constrained due to rising fuel and electricity prices, higher personal income taxes and rising unemployment.

Commenting on this, FNB Chief Economist, Mamello Matikinca-Ngwenya said:

‘Consumers have been taking on more credit as financial pressures mount, but it is unlikely that the modest uptick in credit extension will be sufficient to underpin household consumption amidst dwindling real disposable income growth.’

Pound South African Rand Outlook: Will a Rise in SA Inflation Buoy ZAR?

Looking ahead to Thursday, the South African Rand (ZAR) could rise against Sterling (GBP) following the release of the South African Producer Price Index (PPI).

If April’s PPI rises higher than forecast, it could provide the Rand with an upswing of support.

Meanwhile, on Friday the Pound could rise following the release of the GfK consumer confidence.

If May’s consumer confidence edges up higher than expected, it could cause the Pound South African Rand (GBP/ZAR) exchange rate to rise.

Millie Empson

Contact Millie Empson