Pound to South African Rand (GBP/ZAR) Exchange Rate Rebounds after Rand Rally

Pound to South African Rand Exchange Rate Supported by Brexit Speculation

Despite higher market demand for risk and trade-correlated currencies today, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has been rebounding from its worst levels all week this morning as investors digest yesterday’s news.

Since opening this week at the interbank level of 18.18, volatility in both currencies has led to fluctuations in GBP/ZAR movement.

Earlier this morning, GBP/ZAR touched on a low of 18.06 – which was the worst level for the pair since last week’s one-month-low of 18.03. At the time of writing though, GBP/ZAR was rebounding strongly and trended nearer the week’s opening levels again.

The Pound (GBP) has been benefitting from UK data and Brexit speculation in recent sessions, but this morning’s Pound to Rand gains are also largely due to the South African Rand (ZAR) recoiling slightly from a strong performance yesterday.

Pound (GBP) Exchange Rates Supported by UK Data and Brexit Speculation

The Pound (GBP) has climbed against most major rivals this week, but not against the South African Rand (ZAR).

Investors bought the Pound on Monday in reaction to news that Britain’s economy would likely avoid an imminent recession, but this was not enough to help GBP/ZAR to sustain gains.

Still, the Pound remains fairly appealing this week overall.

Investors are cautiously optimistic about UK Parliament passing a bill to prevent a no-deal Brexit, as well as fresh speculation that a cross-party group of MPs is looking for ways to pass a softer Brexit.

While parliament is prorogued until October, MPs may ramp up attempts to find a solution to Brexit even outside of parliament in order to limit the chances of Prime Minister Boris Johnson finding a way to force a no-deal Brexit.

South African Rand (ZAR) Exchange Rates Recoil Following This Week’s Surge

While the Pound (GBP) saw a surge in demand at the beginning of the week, Sterling’s gains were ultimately overpowered by the South African Rand’s (ZAR) own advances. This left GBP/ZAR near its worst levels yesterday and this morning.

The South African Rand surged earlier this week, in response to a combination of rising market trade-sentiment, as well as the latest developments on South Africa’s credit ratings.

Moody’s, the only credit rating agency that still gives South Africa an investment-grade rating, indicated this week that a downgrade to South Africa’s rating was not likely in the near-future.

The news surprised many investors who had been expecting the credit rating to be downgraded.

Today’s GBP/ZAR gains are largely due to the South African Rand falling back slightly after its strong performance earlier in the week, but the currency’s outlook is still better this week overall.

Pound to South African Rand (GBP/ZAR) Exchange Rate Focused on Politics

There are still a few South African ecostats due for publication before the end of the week; gold and mining production results from July. These will be published tomorrow, but aside from that investors will be looking elsewhere for news to inspire GBP/ZAR movement.

UK Parliament will remain prorogued until mid-October, but developments in domestic politics and Brexit are still possible and are likely to dominate the Pound’s (GBP) movement for the time being.

For example, if Prime Minister Boris Johnson’s government becomes hit with fresh uncertainty Sterling could fall, while any news that MPs could agree to a softer Brexit deal would bolster the British currency.

With Moody’s concerns on hold for now, the trade-correlated South African Rand’s (ZAR) movement will continue to be influenced largely by global trade news.

Any surprise developments in the US-China trade war, or shifts in global risk-sentiment, are likely to have an impact on the Pound to South African Rand (GBP/ZAR) exchange rate.

Josh Jeffery

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