Risk aversion and speculation that the Brexit process could end with a better deal for the UK than most economists expected helped the British Pound to South African Rand (GBP / ZAR) exchange rate last week, but further gains were limited because the markets cooled Thursday and Friday.
After opening the week at the 18.30 hour level, GBP / ZAR crashed until the middle of the week, when it started to rise. On Thursday, GBP / ZAR briefly hit a high of 19.23. This was the best level of the pair in almost two years, since September 2016. While the GBP / ZAR progress slowed afterwards, the pair remained close to those highlights on Friday.
Brexit-Boosted Pound (GBP) uses weakened South African edge (ZAR)
One of the biggest moves in the main currencies last week was the boost in the midweek of the Pound in response to comments from EU Chief Negotiator Michel Barnier.
Barnier said Wednesday that the EU was prepared to offer the UK a post-Brexit partnership that would be unprecedented among non-EU countries.
After weeks of worrying that a & # 39; no deal & # 39; Brexit became more and more likely, these comments gave investors a much needed reason to buy the pound back from the cheapest levels – which was ultimately the rate this week.
The outlook for the Pound did not really improve significantly after Barnier's comments, as both Barnier and market analysts later recalled that the EU was still preparing for the possibility of a & # 39; no deal & # 39; -Brexit .
In essence, Barnier's comments have introduced the possibility of an unprecedented partnership between the UK and the EU, but the chances of such a deal being reached are still perceived as rather low. This has limited the appeal of the Pond.
The exchange rate of the pound to South African Rand almost close to its best level had more to do with widespread weakness in the South African Rand, which was again sold out this week due to various factors, both in its own country and worldwide.
Political uncertainties in South Africa, including concerns about increasing populism, weighed on the South African currency.
Meanwhile, the Rand was also hit during the week by a sale in currencies of emerging markets. A crash in the Argentine Peso (ARS), as well as continuing concerns about a possible Turkish Lira (TRY) crisis, caused investors to hesitate to take risks in currencies of emerging markets.
The Rand stabilized slightly on the sales of the emerging markets on Friday, but in the end the pound-to-south African rand exchange rate won remarkable prices last week and shook close to the best levels since 2016.
Pound (GBP) Forecast: Brexit developments and UK service data in focus
Because the most important movement last week was caused by the latest Brexit developments, it seems likely that the Brexit news is likely to remain the main driver for the movement of the pound in the coming weeks.
Investors can increasingly focus on Brexit until more clarity is achieved in UK-EU Brexit negotiations.
It is expected that negotiators from the UK and the EU will accelerate until a deal is reached, due to concerns from UK and EU officials that the initially planned October deal date may be missed.
Although some leeway is expected on the & # 39; deadline & # 39; From October, this also means that there may be an even longer period of uncertainty for the pound.
Next week, UK PMI results from August will appear, giving investors a better idea of how the British economy performed last month.
However, the uncertainties in Brexit are likely to persist and limit the potential of the pound for profit, even if they make an impression.
The speculation with the Bank of England (BoE) may also increase next week, as the policy decision from the middle of September is approaching.
South African Rand (ZAR) Forecast: South African growth results ahead
The economic calendar of the coming weeks in South Africa will be busier and there are many prints that investors from South African Rand can respond to.
The publication of the PMI of the processing industry in South Africa will be published in August on Monday and the most important growth report of the national growth report Q2 for the gross domestic product (GDP) will be published Tuesday.
If South African growth was better than expected, this could help investors calm down uncertainty about the health of the South African economy. This would support the South African Rand.
Data on the production of mines and production will be published on Friday, which may also have an impact.
Of course, risk sentiment and geopolitical trade news will also remain sharp for investors in Rand's risky emerging market.
If trade relations between the US and China continue to deteriorate, or the concerns about other emerging markets drag on risk sentiment, the South African Rand could suffer another week's loss.