Rand firms 1% against the pound on Brexit concerns

27 November 2018 - 16:24 By KARL GERNETZKY
Ten rand notes. File photo.
Ten rand notes. File photo.
Image: Gallo Images/ IStock

The rand was firmer against major global currencies on Tuesday afternoon, faring best against the pound, despite disappointing local data and poor global sentiment.

The pound was under pressure due to continued uncertainty over prime minster Theresa May’s draft Brexit deal, with May facing stiff opposition from members of her party.

May is now facing the unenviable task of getting the UK parliament to approve the deal that essentially binds the UK to most of the EU’s trade rules without giving the country any representation in the European parliament, said BK Asset Management MD Boris Schlossberg.

Earlier, the business confidence index, from Rand Merchant Bank (RMB) and the University of Stellenbosch’s Bureau for Economic Research (BER), fell to 31 points in the fourth quarter from 34 in the third. Sentiment declined in two of the five sectors, with RMB saying on Tuesday if it had not been for disappointing new vehicle sales, confidence would have edged higher.

Global headwinds were, however, mounting and domestic inflation and interest rates have bottomed, said RMB chief economist Ettienne le Roux.

While President Cyril Ramaphosa’s "refreshing new focus on public-private sector partnerships is welcome", the reality is a multitude of political and policy issues, including land reform, continue to weigh on confidence, said Le Roux.

Global risk sentiment was battered a little on Tuesday by various comments from US President Donald Trump, who had said on Monday he thought it was "very unlikely" that further tariffs against China could be avoided.

Markets are closely watching a Group of 20 (G20) meeting in Argentina starting on Friday, where Trump is expected to meet Chinese Premier Xi Jinping to discuss trade differences.

At 2.05pm the rand was up 1.06% against the pound at R17.624, 0.61% against the euro at R15.6561 and 0.54% against the dollar at R13.8314. The euro was flat at $1.132.

- BusinessLIVE