Picture: REUTERS
Picture: REUTERS

Fading prospects of the UK leaving the EU without a deal saw the rand weaken against the pound on Tuesday afternoon, with the local currency now having given up its gains against sterling this year.

The pound benefited from news that Labour leader Jeremy Corbyn has now shifted his stance to support a second Brexit referendum. Reports have also suggested UK Prime Minister Theresa May could push for an extension of the March 29 deadline for the UK’s exit from the EU, should her draft plan be rejected by British law makers during a vote on March 12.

Analysts said this makes the prospect of an economically disruptive no-deal exit unlikely. “In both cases, the Labour and Tory leaders are clearly reacting to the revolt within their respective parties against a seeming slow roll toward an economic cliff edge,” said BK Asset Management MD Boris Schlossberg.

At 2pm, the rand was 1.11% weaker at R18.3122/£, 0.31% softer at R15.7541/€, and 0.27% down at R13.8662/$. The euro was flat at $1.1362. The pound was 0.83% stronger at $1.3206, its strongest level in four months.

The rand was roughly where it was against the pound ahead of the budget last week, when traders had priced in the risk of the government overshooting its fiscal consolidation targets.

The rand began 2019 at R18.30/£, but benefited from a more dovish turn by the US Federal Reserve in January.

Some global focus on Tuesday is on US Fed Jerome Powell’s testimony before Congress later in the day.