Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Rises on Trump’s Travel Ban
The Pound Sterling South African Rand (GBP/ZAR) exchange rate edged higher following President Trump’s announcement. This left the pairing trading at around R20.8931.
The risk-sensitive South African Rand weakened today over growing concerns about the spread of Covid-19 after the World Health Organization declared the outbreak a pandemic.
Added to this, US President Donald Trump’s announcement of new travel restrictions on Europe added further pressure.
Trump’s announcement brought up further questions of disruptions to trade and the global economy.
Risk appetite was left under pressure, as markets were disappointed by Trump’s travel ban.
Commenting on this, Moh Siong Sim, a currency strategist from the Bank of Singapore stated:
‘The market was looking for more. A travel ban is part of the solution, but the more important parts are still missing. They are really the public health measures: Paid sick leave, free testing, free treatment.
‘The market is right now looking for perhaps more action from the Fed, given the disappointment from the White House.’
Meanwhile, domestic pressures weighed on the Rand. On Thursday Eskom announced there would be nationwide power cuts that will last indefinitely.
The South African firm had said only yesterday that the outages would last until the end of the week.
Emergency BoE Rate Cut Sends Sterling (GBP) Higher
The Pound was able to rise against a weakened Rand ahead of today’s emergency Cobra meeting. The government is expected to switch tactics in response to the spread of coronavirus.
In the meeting, Prime Minister Boris Johnson is expected to announce government plans to move from ‘containment’ to the ‘delay’ phase.
Meanwhile, Sterling gains were likely limited after the Bank of England (BoE) unexpectedly cut interest rates on Wednesday.
This was the bank’s first interest rate cut since August 2016 and the first cut out-of-schedule since the global financial crisis.
Following this cut, British Chancellor Rishi Sunak announced a £30 billion economic stimulus plan.
Commenting on this, MUFG’s currency strategist, Lee Hardman noted:
‘The government has stepped up to the plate with support for the economy and the co-ordinated action with the Bank of England is encouraging.’
Pound South African Rand Outlook: Investors Focus on Coronavirus Pandemic
Looking ahead, the South African Rand (ZAR) could extend its slump against the Pound (GBP) as markets continue to focus on coronavirus.
The UK is likely to step up its response to the outbreak, and if the government announces any further measures, Sterling could receive an upswing of support.
Meanwhile, further information from Eskom about South Africa’s power cuts weigh on the Rand.
If Eskom reveal the outlook for future power cuts is worse than expected, the Pound South African Rand (GBP/ZAR) exchange rate will continue to edge higher.