GBP/ZAR Exchange Rate Tumbles as EU Launches Legal Action against the UK

The Pound to South African Rand (GBP/ZAR) exchange rate struck lower last week as fresh Brexit jitters took their toll on Sterling sentiment.

Last Week: Pound Rocked by Brexit Developments

The Pound initially got off to a strong start last week, surging on the back of reports which suggested the UK and EU were close to finalising a post-Brexit trade deal.

However this may have been a little too optimistic as Sterling subsequently tumbled as the two sides were unable to close a gap in talks and the EU formally launched legal action against the UK for breaching the withdrawal agreement with its internal markets bill.

Meanwhile, an improvement in risk appetite helped to turbo-charge the South African Rand last week, with the market mood showing a marked improvement amid US stimulus optimism.

This jump in the Rand also came in spite of South Africa’s latest employment figures revealing that 2.2 million jobs were lost in the second quarter.

Three Things to Watch out for This Week

  1. Coronavirus Headlines

The GBP/ZAR exchange rates is likely to remain sensitive to coronavirus concerns this week, with the Rand in particular, likely to face some headwinds if surging cases results in countries imposing more restrictions which could impact economic activity.

  1. Brexit Developments

For GBP investors the focus this week will remain on Brexit, as both sides ‘work intensively’ to try and bridge the remaining gaps in talks.

  1. UK GDP

Also set to influence the Pound this week will be the publication of the UK’s latest monthly GDP release. Will another robust rise in economic growth in August help to buoy Sterling?

GBP/ZAR Outlook

Looking ahead, the GBP/ZAR exchange rate could be infused with fresh volatility this week as the coronavirus pandemic and Brexit remain firmly in focus.

Matthew Andrews

Contact Matthew Andrews