The Pound to South African Rand (GBP/ZAR) exchange rate fell back last week, driven lower by fresh Brexit uncertainty.
Last Week: Pound Rocked by Brexit Drama
After some initial support, the Pound fell back at the start of last week, being undermined by Boris Johnson’s declaration that Brexit trade talks with the EU were ‘over’.
This then gave way to a sharp rally in Sterling on Wednesday, after the EU’s Chief Negotiator Michel Barnier was able to persuade Johnson to return to the negotiating table.
However the Pound was unable to sustain this rally, with the GBP/ZAR exchange rate quickly falling back through the second half of the week as investors were sobered by the prospect of more Brexit uncertainty in the coming weeks.
Meanwhile, the South African Rand moved broadly higher last week, with the emerging market currency benefiting from an upbeat market mood, stemming from US stimulus optimism.
But the Rand’s advance did not come without some hurdles, with Europe’s coronavirus woes tempering risk demand at points throughout the week.
Three Things to Watch out for This Week
1. Coronavirus Headlines
With a second wave of coronavirus infections sweeping across the world, the threat of a double-dip global recession is on the rise, fears of which looks likely to infuse fresh volatility into the GBP/ZAR exchange rate.
2. Brexit Drama
Continuing to act as the main catalyst in the Pound this week will be Brexit. Will reports of positive progress help to bolster Sterling sentiment?
3. South African Budget
In focus for GBP investors this week will be South Africa’s medium-term budget policy statement. This mini-budget and accompanying economic forecasts are set to thrust South Africa’s bleak financial position back into the spotlight, with some dire debt forecasts likely to be particularly damaging to the Rand.
Looking ahead, trade in the GBP/ZAR exchange rate is likely to remain volatile this week as coronavirus and Brexit uncertainty continue to dominate market sentiment.