Pound to South African Rand (GBP/ZAR) Exchange Rate Sustains Gains as Rand Plummets
Despite a lack of strong support for the Pound (GBP) lately, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has been surging this week as markets see a broad selloff of the South African Rand (ZAR).
After opening the week at the level of R18.38, GBP/ZAR briefly dipped before a flood of disconcerting South African news began to come in, leading the Rand to plummet and causing the pair to gain almost half a Rand in a day.
This morning, GBP/ZAR is trending closely to a high of R19.23 – the pair’s best levels since late March. GBP/ZAR is on track to have gained almost a Rand throughout the week.
The strong gains this week have been almost entirely due to South African Rand weakness, though the Pound has been avoiding further losses itself as investors await political developments.
Pound (GBP) Exchange Rates Lack Drive as Theresa May Steps Down as Conservative Leader
Following the Pound’s (GBP) May plunge, the British currency has been range-bound this week, being driven more by the strength of its rivals.
Some investors have been buying the Pound back from its lows after its plummet throughout May, but overall demand for the currency remains subdued and there isn’t much in the way of support.
Political and Brexit uncertainty is keeping Sterling from moving too much as well. The UK Conservative Party leadership contest is set to officially begin next week, with Prime Minister Theresa May stepping down as leader today.
May will remain Prime Minister until a successor is chosen, with the leadership contest ongoing until mid-July.
Analysts are concerned about the possibility that a hard Brexit advocate could succeed May as Prime Minister, although generally there is an expectation that Parliament will foil attempts to leave the EU without a deal.
South African Rand (ZAR) Plummets as Domestic Uncertainties Worsen
Near the beginning of this week, South Africa’s Q1 Gross Domestic Product (GDP) growth rate results were published and revealed a shocking contraction of-3.2% in the first quarter. This led to a disappointingly stagnant year-on-year growth rate.
After those stats shocked Rand (ZAR) investors and worsened concerns about South Africa’s economic outlook, the latest South African political news only worsened the outlook.
The ruling African National Congress (ANC) Party announced that it wanted the South African Reserve Bank (SARB) to consider using quantitative easing (QE) to lower government debt.
There were other calls for the bank to boost employment and growth in the economy, but other parts of the ANC opposed these calls.
The news made investors anxious about the central bank’s independence from the government. SARB independence is one of the most valued aspects of South Africa’s economy for global markets.
Pound to South African Rand (GBP/ZAR) Exchange Rate Traders Await Political Developments
South African growth data was detrimental to the Rand outlook last week, but Pound to South African Rand (GBP/ZAR) exchange rate investors are more likely to focus on political news than economic data in the coming week.
Britain’s Conservative Party leadership contest will officially begin on Monday, and if hard Brexit advocates perform well the Pound (GBP) is likely to remain pressured.
Political developments in South Africa have even more potential to influence currency movement, depending on how the row over the SARB mandate unfolds.
If concerns about the bank’s independence persist or worsen, the South African Rand (ZAR) is unlikely to see much in the way of support. If the row cools though, the Rand may be able to recover some of the past week’s steep losses.
Upcoming South African data that could influence the Pound to South African Rand (GBP/ZAR) exchange rate includes manufacturing data on Tuesday, retail sales on Wednesday and business confidence on Thursday.