GBP/ZAR Exchange Rate Eases, Investors Remain Cautious Ahead of Election Results
The Pound South African Rand (GBP/ZAR) exchange rate eased by -0.2% this morning, with the pairing currently trading around R19.330 as markets remain cautious ahead of today’s UK general election outcome.
Although markets have generally priced in a Conservative majority win today, investors are still remaining cautious on the real possibility of a hung parliament this evening, a prospect which is clipping Sterling’s gains today.
Oliver Allen, UK Economist at Capital Economics, commented:
‘The Conservatives failing to win a majority would come as a shock, and could result in a significant drop in the Pound.’
Expect volatility from the Pound today for with political developments dominating market attention, the Pound is effectively rudderless until the initial results come in following 22:00 GMT.
In UK economic news, today saw the release of the UK RICS Housing Price Balance figure for November, which fell unexpectedly from -5% to -12%, its fastest falling rate in seven months.
Simon Rubinsohn, RICS Chief Economist, said:
‘Whatever happens in the general election today, it is important that the new government provides reassurance both over the stewardship of the economy and the ongoing challenges around Brexit.’
ZAR/GBP Exchange Rate Improves on ‘Relatively Calm’ US-China Trade Relations
The South African Rand (ZAR) has benefited from a ‘relative calm’ in the US-China trade war today, with the risk-sensitive ZAR recovering some of its appeal as the world’s two largest economies show signs of making progress towards a deal.
Jerome Powell, the Chairman of the Federal Reserve, commented:
‘It is in both China’s and the US’s self-interest to have a period of relative calm in the trade tensions over the next six to nine months.
‘That period of relative calm should feed through – even if it is just a tepid recovery in corporate confidence along with looser financial conditions and still robust demand from the consumer side – into a pickup in [capital expenditure] or manufacturing data.’
With China being one of South Africa’s largest trading partners, news of improving relations between Washington and Beijing has buoyed risk-appetite for the ZAR today.
South Africa’s PPI figure for November, however, fell below forecasts today from 0.3% to -0.3%, further exacerbating fears for South Africa’s flagging economy.
Today also saw the release of South Africa’s influential Total Mining Output figure fall to -2.9% year-on-year, bringing further bad news to the SA economy.
GBP/ZAR Outlook: Could the Pound Plunge on a Hung Parliament?
UK political developments following the general election will determine the direction of the Pound tomorrow.
Any signs of a hung parliament or a victory for the Labour Party would weaken the Pound as markets would be thrown into a state of uncertainty after having generally priced in a Conservative victory this evening.
South African Rand (ZAR) investors, meanwhile, will be keeping a close eye on developments between the US and China, with any indications of a trade deal emerging before Christmas providing a boost for the risk-averse ZAR.