The Pound to South African Rand (GBP/ZAR) exchange rate traded in a wide range through last week’s session as a result of the heightened uncertainty surrounding Brexit trade talks.
What’s Been Happening: Pound Rocked by Brexit Doubts
The Pound had a rollercoaster ride through last week’s session, as confidence in the currency was rocked by a flurry of Brexit headlines.
This initially resulted in some strong gains for Sterling, as GBP investors seized on reports suggesting that trade talks between the UK and EU had entered the ‘tunnel’ phase of intensive negotiations.
But these reports ultimately proved to be false, resulting in a quick reversal of these gains in mid-week trade.
While the Pound made another attempt to rally in the second half of the week, this upside again proved short-lived as GBP investors were spooked by comments from a UK official suggesting the chances of a trade deal were ‘receding’.
Meanwhile, the South African Rand got off to a poor start last week, as the sustain uptick in ZAR exchange rates through November resulted in some profit taking in the emerging market currency in end-of-month trade.
Adding to the Rand’s woes were concerns about how a legal fight over public sector wages could impact the country’s already fragile economy.
Three Things to Watch Out for This Week
1. Brexit Headlines
Brexit developments will undoubtedly act as the main catalyst of movement in the Pound this week, likely infusing fresh volatility in the currency as markets brace for a final week of tense trade negotiations.
2. UK GDP
Also influencing GBP exchange rates this week will be the UK’s monthly GDP release, where a slowing of growth in October could pile more pressure on Sterling.
3. ZAR GDP
For ZAR investors the focus this week will be on South Africa’s third quarter GDP release. Will a strong rebound in domestic growth over the summer be enough to distract from South Africa’s underlying economic weakness and boost the Rand?
Looking ahead, it seems safe to assume that Brexit developments will continue to dictate movement in the GBP/ZAR exchange rate through this week’s session, with even greater drama likely to infuse fresh volatility in the pairing.