Pound to South African Rand (GBP/ZAR) Exchange Rate Climbing despite Brexit Fear and Risk-Sentiment

Pound to South African Rand Avoids Losses as UK Recession Fears Lighten

Essentially every major Pound (GBP) exchange rate advanced today as investors digested the latest UK growth rate data, including the Pound to South African Rand (GBP/ZAR) exchange rate. This was despite persisting no-deal Brexit fears, as well as a stronger South African Rand (ZAR).

It’s been a highly volatile September for GBP/ZAR so far. GBP/ZAR tumbled from the interbank level of 18.47 to 18.15 last week, failing to sustain a late-week recovery due to the rise in risk sentiment that’s supported the Rand.

This week so far, GBP/ZAR has been climbing due to today’s surge in Pound demand.

However, its gains have been limited by South African Rand resilience and at the time of writing the pair had only climbed to around the interbank level of 18.19.

Pound (GBP) Exchange Rates Surge as UK Recession Fears Doused

The Pound (GBP) was suffering from yet another round of no-deal Brexit jitters when markets opened this week, but Monday’s UK data presented an apt distraction from those latest political uncertainties.

Britain’s July Gross Domestic Product (GDP) growth rate report beat forecasts in most major prints, with the three month average figure avoiding a contraction of -0.1% to come in at a stagnant 0.0%.

While the stagnant figure remained concerning, and some analysts believed the July improvement was due to preparation for Brexit, the data was overall enough to stave off fears that Britain’s economy was headed for an imminent recession.

The think tank, NIESR, was among the analysts predicting that a recession would be avoided:

The report’s downsides, combined with political developments, limited the Pound’s potential for gains however.

Amid ongoing speculation that UK Prime Minister Boris Johnson could find a way to force a no-deal Brexit, as well as news that Parliament Speaker John Bercow would be stepping down from his role in October, political uncertainty continued to weigh.

South African Rand (ZAR) Exchange Rates Sturdy amid Rising Market Risk-Sentiment

As the South African Rand (ZAR) is a currency strongly correlated to global trade and shifts in risk-sentiment, the currency has been more appealing since risk-sentiment recovered last week.

Last week saw global political tensions lighten in Italy, Hong Kong, and Britain, which led to higher market risk-sentiment.

On top of this, speculation has been rising that major economies like China and the US will continue to introduce more economic stimulus.

Expectations for monetary policy easing from the Federal Reserve in the coming months have played a part in the Rand’s strength today. It followed comments from Fed Chairman Jerome Powell on Friday that were seen as fairly dovish.

Pound to South African Rand (GBP/ZAR) Exchange Rate Could be driven by Data Again Tomorrow

While UK politics continued to cast a shadow of uncertainty over the Pound to South African Rand (GBP/ZAR) exchange rate today, Parliament is set to be prorogued at the end of today’s session.

The prorogation is set to last through until the 14th of October, which means another extended period of political uncertainty with the formal Brexit date just over a month away.

As a result, market movement may focus more on economic data in the coming sessions.

On Tuesday, Britain’s July job market report will be published, as will South Africa’s July manufacturing production stats.

Following that though, Britain’s economic calendar will be quiet for the rest of the week. This will leave GBP/ZAR reacting to South African data.

Amid speculation that UK Prime Minister Boris Johnson could ignore the law in attempts to force a no-deal Brexit, there may still be notable political developments driving the Pound to South African Rand (GBP/ZAR) exchange rate even with parliament prorogued.

Josh Jeffery

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