GBP/ZAR Exchange Rate Falls by 1%, South African Economic Stimulus Measures in Focus
The Pound South African Rand (GBP/ZAR) exchange rate fell by -1% today. South Africa’s Reserve Bank (SARB) is expected to be less aggressively on rate cuts than other global central banks amid the global Covid-19 outbreak. The pairing is currently trading around R20.114.
South African President Cyril Ramaphosa acknowledged the economic crisis facing the nation on Sunday.
Mr Ramaphosa said:
‘[The coronavirus could present a] potentially severe impact on production, the viability of businesses, job retention and job creation. [We’re preparing a] comprehensive package of interventions to mitigate the expected impact of Covid-19 on our economy.’
‘This package, which will consist of various fiscal and other measures, will be concluded following consultation with business, labour and other relevant institutions.’
The South African Rand (ZAR) benefited from the sell-off of the US Dollar following this week’s emergency US Federal Reserve rate cut. Investors seek out riskier assets as the world’s largest economy continues to struggle from the coronavirus pandemic.
Pound (GBP) Exchange Rate Drops, UK Stimulus Package in Focus
The Pound (GBP) struggled against the South African Rand (ZAR) after the UK ILO Unemployment Rate in January rose unexpectedly by 3.9%.
Pawel Adrjan, a UK Economist at Indeed, was downbeat in his analysis:
‘There’s more than a touch of Alice in Wonderland about these jobs figures. They paint a broadly rosy, but now hopelessly outdated, picture of a labour market which is having to adapt to a completely new reality.’
Sterling is also subdued after British Prime Minister Boris Johnson revealed the Government’s new approach to the UK’s coronavirus crisis. With rising uncertainty over the UK economy going forward, the GBP/ZAR exchange rate has remained under pressure.
Pound investors are bracing for Chancellor Rishi Sunak’s approach to a stimulus package. This will aim to aid businesses and the British economy through the eCovid-19 pandemic.
Chairman at the Office for Budget Responsibility Robert Chote commented:
‘It is no abdication of budget responsibility to be spending what you need to spend to ideal with this – in some ways it is like a wartime situation. We ran during the Second World War budget deficits in excess of 20pc of GDP five years on the trot and that was the right thing to do at the time.’
GBP/ZAR Outlook: Coronavirus Developments in Spotlight
South African Rand (ZAR) investors are awaiting tomorrow’s release of South Africa’s Consumer Price Index for February. Any signs of improvement in South Africa’s inflation would uplift ZAR.
Markets also await Thursday’s interest rate decision from the SARB. With the bank expected to slash its interest rate from 6.25% to 6%, we will likely see the ZAR/GBP exchange rate sink.
The GBP/ZAR exchange rate will remain highly sensitive to coronavirus developments this week. Any further signs of the British economy suffering would prove Pound-negative.