GBP/ZAR Exchange Rate Plummets to New Eight-Month Low on Brexit Jitters

GBP/ZAR Exchange Rate Slumps as No-Deal Brexit Risks on the Rise 

The Pound to South African Rand (GBP/ZAR) exchange rate finds itself striking a new eight-month low this morning, amidst growing concern that the UK is headed for a no-deal Brexit.  

At the time of writing the GBP/ZAR exchange rate is trading at around ZAR19.986, down roughly 0.3% from this morning’s opening rate. 

Pound (GBP) Tumbles as Trade Talks Remain Deadlocked Despite Crunch Meeting 

The Pound (GBP) extended its downtrend against the South African Rand (ZAR) this morning, with the pairing falling to its worst levels since March, in response to growing Brexit anxiety. 

This comes after a crunch meeting between Boris Johnson and European Commission President Ursula von der Leyen, failed to result in a breakthrough in trade talks. 

Following the meeting Downing Street suggested that ‘very large gaps remain’, while von der Leyen said that the two sides remain ‘far apart’. 

Three main sticking points continue to block progress, with the two sides unable to reach agreements on fishing rights, business competition rules or how a deal will be enforced. 

While trade talks are set to continue through to Sunday, analysts seem pessimistic on the chances of this delivering a breakthrough. 

Unsurprisingly this has spooked GBP investors this morning as the path to a no-deal Brexit is looking increasing inevitable, with economists fearing the damage a disruptive Brexit will do to the UK economy at the same time that it dealing with the fallout from the coronavirus pandemic. 

South African Rand (ZAR) Firms Following Positive Data

At the same time, the South African Rand (ZAR) continues to strengthen this morning in the wake of this week’s positive data. 

The Rand continues to benefit from Tuesday’s GDP figures after they revealed a stronger-than-expected rebound in economic growth in the third quarter. 

This positive tone was then reinforced by a smaller-than-expected contraction of retail sales in October and inflation printing in line with expectations in November. 

Analysts expect this uptrend in the Rand to continue for the time being as well. 

Cristian Maggio, head of emerging market strategy at TD Securities comments:  

‘The rand has done exceptionally well after the initial selloff. Maybe the central bank cuts rates again and weakens the carry trade, that could be a reason for a pullback. Except for that, we should be expecting a confirmation of the strength.’