Pound to South African Rand (GBP/ZAR) Exchange Rate Struggles to Sustain Gains amid Resilient Rand

Pound to South African Rand Exchange Rate Lower Again on Fed Rate Cut Bets

Since markets opened this week, investors have been buying the Pound (GBP) back up from its recent lows, but the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has been unable to sustain any notable gains amid resilience in the South African Rand (ZAR).

Last week saw significant losses in GBP/ZAR. The pair opened the week at the interbank level of 18.64 and closed the week at around 18.24, as markets became more optimistic about South Africa’s new government.

This week so far, GBP/ZAR has trended with an upside bias as some investors buy the Brexit-battered Pound back from its cheapest levels.

However, the pair has been unable to hold gains and at the time of writing was trending closer to the week’s opening levels again. GBP/ZAR remains fairly close to last week’s post-February low of 18.04.

Pound (GBP) Exchange Rate Gains Limited by UK’s Political and Economic Jitters

Investors have been hesitant to buy the Pound (GBP) too much, as uncertainties regarding Britain’s political outlook persist.

Brexiteer Boris Johnson has been the clear frontrunner of the Conservative Party leadership contest so far, and analysts believe he is likely to succeed Theresa May as Prime Minister by the end of July.

As Johnson said today that he was serious about his claim that he would rather aim for a no-deal Brexit than delay the process again, no-deal Brexit fears persist and keep pressure on the Pound outlook.

On top of political and Brexit jitters, the latest UK ecostats have given investors little to cheer about.

This morning’s UK distributive trades data for June, from the Confederation of British Industry (CBI), printed well below expectations with a steep contraction of -42.

Some analysts speculated that the weakness in retail activity could be more than just a blip, which weighed on the Pound today.

South African Rand (ZAR) Exchange Rates Gaining on Fed Rate Cut Bets

Despite market concerns about global trade tensions and rising geopolitical tensions ahead of the G20 Summit at the end of the week, the South African Rand (ZAR) has avoided falling much since markets opened yesterday.

The South African Rand struggled to hold its best levels following last week’s surge in demand, but at the same time investors were hesitant to sell the currency much either.

As markets kept betting that the Federal Reserve would cut US interest rates over the next year, and US data continued to disappoint, currencies that benefit from US Dollar (USD) weakness like the trade-correlated South African Rand advanced.

Analysts saw last week’s State of the Nation Address (SONA) by South African President Cyril Ramaphosa as having limited notable impact on the Rand outlook.

Pound to South African Rand (GBP/ZAR) Exchange Rate Anticipates Trade Developments

As South Africa’s recent political jitters continue to cool, the South African Rand’s (ZAR) movement has been more correlated to movement in major currencies like the US Dollar (USD), as well as recent global trade developments.

With UK politics unlikely to have any majorly surprising developments in the coming week, Pound to South African Rand (GBP/ZAR) exchange rate movement will be focused on the Rand’s movement.

As a result, Rand investors are highly anticipating further developments in geopolitical developments, such as tensions between the US and Iran, as well as the trade developments possible at the upcoming G20 Summit.

The G20 Summit in Osaka will begin on Friday. US President Donald Trump and China President Xi Jinping are expected to hold a meeting, and if there are any developments in US-China trade tensions this could be highly influential.

Britain’s Q1 Gross Domestic Product (GDP) growth rate, due on Friday, could also cause some Pound to South African Rand (GBP/ZAR) exchange rate movement if it surprises investors.

Josh Jeffery

Contact Josh Jeffery