The South African Rand exchange rates had been moving aggressively in the lead up to and subsequent vote of approval from law-makers.
Political Landscape in South Africa
South African Law-makers were asked to vote in secret on a vote in order to reduce the likelihood of persuasion from Zuma supporters. The decision to approach the vote in this way saw the ZAR/USD rally – up 0.9%. With many believing that this would have been the best chance of forcing Zuma’s resignation.
Investors were left disappointed when it was confirmed that President Zuma narrowly survived the vote. Confirmation of him keeping a grasp on power saw all ZAR gains swiftly reversed seeing the Rand Exchange rates lose 1.4% against the US Dollar.
Many now worry that his survival of the ‘No Confidence’ vote will allow him to see out his tenure and remain in power until 2019, therefore allowing him to name a successor when he stands down.
South African Economy and Unemployment
Zuma has come under immense pressure due to fears over South Africa’s economy, with the nation heading towards its second recession in ten years. Last time the cause being the fault of the Global financial crisis, this time the blame is firmly at President Jacob’s door.
Many are blaming Zuma for rash political tactics which is deterring outside investment in South Africa’s economy. With property, business and finance all suffering from the president’s moves.
Unemployment has also been rising under his leadership, slowly rising to its year high of 14%.
The nation also now faces the very real possibility of financial downgrade, with the possibility of South Africa’s credit rating being downgraded to ‘Junk Status’.
Recent Rand Exchange Rates volatility – GBP/USD & USD/ZAR
GBP to ZAR has been affected dramatically over the last week by news coming out of South Africa with significant losses and gain experienced.
The first drop was initiated by the news that voting would be held under cover eliminating the potential of outside involvement. Whilst the second upward GBP/ZAR jump was the result of the vote. GBP/ZAR enjoyed highs of 17.54 which should be surpassed this week following news that Phillip Hammond and Liam Fox have reach a level of agreement on a Brexit bill.
As mentioned above some of the most significant movement had been seen against the USD with USD/ZAR a popular trading pair due to the Rands’ close tie to Gold and Platinum; especially considering both are exported from there. USD/ZAR movements have mimicked those of the GBP/USD, however, Trump’s stance against North Korea and the weeks Jobs’ data, one of the cornerstones of the US economy has added further volatility. Over the last week USD/ZAR has traded at a high of 13.5044 and a low of 13.1404.