Pound Rallies despite Growing Concerns about UK Leadership
The Pound has advanced by 0.8% against the South African Rand today, despite the handicap of a possible Conservative leadership battle behind the scenes.
Although fears of this event had faded in the aftermath of the snap election earlier this year, they have since returned in force due to the actions of Boris Johnson.
The Foreign Secretary has recently published an article repeating his claim about £350m going to the EU each week, which has inflamed opinions about the Brexit process.
Although the actual workings behind the £350m sum are highly suspect, this has not prevented widespread speculation about Johnson’s motive.
As well as backing the dubious NHS sum, Johnson has also rejected the idea of paying the EU anything after Brexit, putting him at odds with Prime Minister Theresa May.
This has led some to conclude that Johnson might be aiming to displace the Prime Minister as leader in the future, which would lead to high turbulence and a possible crash for the Pound.
The Pound could firm against the Rand on Tuesday, depending on what Bank of England (BoE) Financial Policy Committee (FPC) member Donald Kohn says.
If Kohn supports the BoE raising interest rates, then the Pound may retain its current advantage against the Rand.
Rand Slides over Uncertainty about Zuma Ousting
Although South Africa has seen growth recently, the Rand has remained in low demand, particularly against the Pound.
This is because of fading confidence that President Jacob Zuma will be ousted from power, even after he leaves his position as African National Congress (ANC) leader.
The President is an extremely controversial figure, who has survived many votes of no confidence as well as attempts to pin hundreds of corruption charges to him.
The present concern is that if Zuma is able to put his preferred candidate in position as leader of the ANC after he leaves then there will be no risk of his being impeached or ousted.
Looking at the issue with a pragmatic eye was Jah Dehn, Head of Research at Ashmore;
‘Zuma is holding on in order to be able to select his successor, so as to be able to avoid jail for corruption. To get support in [the] ANC he seeks control of public finances…so that he can extend patronage’.
In the near-term, the Rand could fall further if the South African Reserve Bank (SARB) cuts interest rates this week.
This would be because the national economy is still at risk, so being forced to cut rates demonstrates what a bad position the economy is in at present.