Pound to South African Rand (GBP/ZAR) Exchange Rate Struggles to Hold Half-Month-Best as Jitters Cool

Pound to South African Rand Exchange Rate Advances Limited amid Rand Rebound

The Pound (GBP) has been advancing on UK data this week, but the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has been struggling to sustain fresh gains. The South African Rand (ZAR) is rebounding following a sharp selloff.

Last week saw GBP/ZAR advance sharply. It reversed most of its December losses and gained from the interbank level of 18.35 to 18.71.

This week’s movement has been more limited and mixed so far as the Rand avoids further losses. At the time of writing, GBP/ZAR is still trending close to the week’s opening levels.

Demand for the Pound remains positive today. Cooling market sentiment has supported the Rand’s rebound though, and as a result the pair has been unable to sustain fresh gains.

Pound (GBP) Exchange Rates Continue to find Support in UK Services Hopes

Britain’s final December services PMI report from Markit was published yesterday. It came in with a stagnant 50.0 and beat projections of a deepening contraction.

The data was a pleasant surprise for investors following last week’s weaker than expected UK manufacturing and composite results. As the services report showed that new orders were well up, hopes for resilient economic activity in 2020 rose and the Pound advanced.

Sterling remained appealing on this news today. The British currency also benefitted from hopes of progress in the Brexit process.

UK Parliament will return from holiday recess this week and are expected to vote on the government’s Brexit withdrawal, following the successful passing in December.

It is expected to pass, which is also keeping the Pound supported.

South African Rand (ZAR) Exchange Rates Rebound despite Mixed Demand

The South African Rand (ZAR) saw a steep selloff last week, in reaction to a combination of South African economic concerns and reaction to the shock rise in US-Iran tensions.

The US ordered an air strike which killed Iranian General Qassem Suleimani, one of Iran’s top-ranked officials. Analysts responded with expectation that Iran would likely retaliate in some form.

The events shocked markets, leaving currencies correlated to risk weaker. Prices of oil also surged amid the market jitters.

As the South African Rand is often correlated to risk and South Africa imports its oil, these factors all dragged the Rand lower.

However, the sharp selloff may have run its course, with investors hesitant to sell the Rand lower this week.

GBP/ZAR has been unable to sustain further gains as the Rand rebounds slightly following days of losses. Oil prices have fallen back from highs as well which may be encouraging the Rand rebound. According to Cristian Maggio, Head of Emerging Markets Strategy at TD Securities:

‘I think today is just a technical rebound,

There’s nothing really new that has happened and perhaps the market is taking a chance to take a contrarian view, in the short term at least.’

Pound to South African Rand (GBP/ZAR) Exchange Rate May Struggle to Advance Higher

Monday’s UK data notably boosted Pound (GBP) support due to fresh hopes for economic resilience. Meanwhile, the South African Rand’s (ZAR) current rebound may not last particularly long.

Despite this though, the Pound to South African Rand (GBP/ZAR) exchange rate could struggle to sustain much in the way of further gains.

A lack of notable UK data for the remainder of the week will leave Brexit in focus again for Pound investors. UK Parliament will discuss and vote on the government’s Brexit withdrawal bill this week.

It is once again expected to pass cleanly, due to the Conservative government’s strong majority.

However according to Neil Mellor, Senior Forex Strategist at BNY Mellon, there is still likely to be pressure on the Pound going forward due to uncertainty over the next phase of Brexit negotiations:

‘There’s going to be a strain on Sterling going forward because it’s very clear that the EU doesn’t want to facilitate a competitor,’

This could keep the Pound from advancing further in the coming sessions.

The Pound to South African Rand (GBP/ZAR) exchange rate could still advance however, if global geopolitical tensions worsen further and push the South African Rand even lower.

Josh Jeffery

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