Rand softer as traders brace for possible pound volatility
The local currency tracked the euro weaker, while markets prepare for possible currency swings as UK MPs vote on Brexit tonight
The rand was a little softer against major global currencies on Tuesday afternoon, tracking a slightly weaker euro, ahead of what might be a volatile overnight session.
All eyes are on a looming vote on UK Prime Minister Theresa May’s draft Brexit deal, which will begin at 9pm SA time.
May requires support from 320 MPs out of 649, and, if defeated, the margin will be important. Some analysts maintain a slim defeat could even be pound positive, as it could point to the possibility of successful second vote, if further concessions are first won from Brussels.
“We’ve seen some decent gains in the pound over the past 48 hours or so on the back of the assurances provided by the EU and suggestions that some eurosceptics are planning to back her deal,” said Oanda analyst Craig Erlam.
Even a defeat would not completely kill May’s deal, but could put impetus behind a no-confidence vote in her leadership, and bolster calls for a second referendum.
At 2pm the rand was 0.42% weaker at R13.8207 to the dollar and 0.33% at R17.7719 to the pound, while remaining flat at R15.7986 to the euro. The euro was 0.32% weaker at $1.1432.
The euro is under some strain due to data showing tepid eurozone growth, with industrial production falling more than expected on Monday. On Tuesday, German GDP growth for 2018 came in as expected at 1.5% year on year, but this is less than the 2.7% growth registered in 2017, with analysts fingering the damaging effects of trade disputes.
The rand usually tracks the euro, due to the eurozone’s importance to SA as a trading partner. A weaker euro also often means dollar strength, which weighs on commodity prices, and therefore the rand.
Local data earlier was negative, with mining production decreasing 5.6% year on year in November. The Bloomberg economists’ consensus was for a 0.2% decline.