Pound to South African Rand Exchange Rate Benefits from Eskom Jitters Hitting Rand
Despite a fresh surge in UK political uncertainty today, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has seen a surge in demand this morning. This is due to a combination of factors, including market risk-aversion and concerns about South Africa’s Eskom issues.
Following last week’s sharp GBP/ZAR losses from the interbank region of 19.16 to 18.76, GBP/ZAR was trending with a downside bias yesterday, before jumping and trending closer to the interbank level of 18.76 at the time of writing.
With a UK election likely in December however, the Pound to South African Rand exchange rate’s potential for gains is highly likely to be limited.
The pair may still be likely to gain however, if global trade uncertainties worsen and weaken the South African Rand (ZAR) again.
Pound (GBP) Exchange Rates Sturdy despite Expectation of General Election
It’s already been a chaotic week in UK politics.
Following yesterday’s blocked attempt to push a general election, and the EU’s confirmation that Brexit would be delayed until the 31st of January, today has seen Britain’s political parties indicate that they were willing to accept a December election.
It comes as Britain’s opposition Labour Party indicated that its conditions for accepting an election had been met. With most of parliament likely to back an election, the government’s next attempt to push an election plan through parliament is now expected to succeed.
Sterling advanced in reaction to news of a December election, as markets believe a win for the Conservative Party is likely.
https://twitter.com/steveinnes123/status/1189140662588854273
South African Rand (ZAR) Exchange Rates Tumble on South Africa’s Eskom Rescue Plan
GBP/ZAR was able to advance even more easily due to today’s broad weakness in the South African Rand (ZAR).
The Rand has been sold amid a combination of both domestic and global factors. Fresh uncertainty in US-China trade tensions today has made investors hesitant to buy the risk-correlated South African Rand, but the primary cause of losses was domestic jitters.
Investors are anxious about South Africa’s economic outlook, amid recent weakness in data and concerns that the nation will continue to be negatively impacted by an ongoing energy crisis.
South Africa’s government unveiled its awaited plan to rescue the state-owned Eskom power utility today. The plan is expected to end with Eskom losing its near-monopoly over South Africa’s electricity industry and lead to a rise in private generators.
The news left Rand investors anxious amid uncertainty over how effective the plan would be and how much longer the energy crisis would negatively impact South Africa’s economy.
Pound to South African Rand (GBP/ZAR) Exchange Rate Awaits UK Political Developments
The Pound (GBP) is climbing on UK election speculation today, but as markets continue to digest the likelihood of a December election and the election’s potential outcomes, the Pound could remain under pressure.
For the time being, investors are hopeful that the Conservative Party will perform strongly enough in the election to help Prime Minister Boris Johnson to pass his relatively soft Brexit plan.
However, while the Conservative Party is polling better than opponents, there is uncertainty over whether the party will be able to perform well enough to win a majority.
There is also uncertainty over the possibility that the opposition Labour Party could perform better than expected. If Labour performs well it could lead to further Brexit uncertainty, which would weigh on Sterling.
While GBP/ZAR investors will be focused on UK politics in the coming sessions, the South African Rand (ZAR) could also be influenced by South African PPI and trade balance data on Thursday, or manufacturing data on Friday.
Trade news such as US-China trade developments could also influence the Pound to South African Rand (GBP/ZAR) exchange rate.