Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Muted as Fed Announces New Stimulus
UPDATE: The Pound Sterling South African Rand (GBP/ZAR) exchange rate edged higher this afternoon, leaving the pairing trading at around R20.5989.
Sterling weakened today as investors began rushing back to the safety of the US Dollar as coronavirus worries intensified.
However, the British currency’s fall was limited after the US Federal Reserve announced fresh stimulus measures to help combat the crisis.
The Fed’s latest move also provided a slight upswing of support for riskier currencies such as the Rand, while triggering a fall in the Dollar.
Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Muted Ahead of Ramaphosa’s National Address
The Pound Sterling South African Rand (GBP/ZAR) exchange rate remained flat, leaving the pairing trading at around R20.5385.
The South African Rand remained under pressure on Monday morning as coronavirus fears mounted on the risk-sensitive currency.
Covid-19 fears saw the Rand almost plummeted to a lifetime low against the US Dollar (USD) as the number of reported causes continued to rise.
The already weak sentiment was shaken as markets expected stricter measures to be enforced to help the spread of the virus. Added to this, with a review from Moody’s, due on Friday, the country’s last investment grade credit rating could soon disappear.
Earlier in the month, President Cyril Ramaphosa declared a national state of disaster and was scheduled to announce additional measures on Sunday.
However, his national address was pushed back and is expected today. This increased speculation that he was preparing to announce a national shutdown in South Africa.
Sterling (GBP) Left Flat as UK Prepared to ‘Do What it Takes’
Coronavirus remained in focus for traders, as slight weakness in the US Dollar (USD) offered the Pound some support.
Investors remained on edge after the US Senate failed to approve a $1 trillion-plus bill on Sunday, with the deadlock dampening sentiment.
Commenting on this, global chief markets strategist at AxiCorp, Stephen Innes noted:
‘While other governments around the world pour money into fiscal spending, the US can’t get over its political squabbling. Democrats claim the money will just go to corporates, and hence they can’t support it.’
Meanwhile, in the UK, Prime Minister Boris Johnson warned that the government would have to impose stricter measures. This comes despite the government closing pubs, clubs and gyms.
British health secretary, Matt Hancock has said the government is prepared to ‘do what it takes’ to help tackle the Covid-19 pandemic.
Under new proposals discussed by lawmakers, the police could force anyone showing symptoms of the virus to isolate and airports could be closed.
Pound South Africa Rand Outlook: Will Ramaphosa Announce a National Shutdown?
Looking ahead, the South African Rand (ZAR) is likely to remain under pressure against the Pound (GBP) ahead of Cyril Ramaphosa’s national address.
If the South African President announces a national shutdown, it will dampen Rand sentiment further.
However, tomorrow’s UK flash PMI data could send Sterling tumbling against a handful of currencies.
If data shows the both the UK manufacturing and services sectors have slumped back into contraction, the Pound South African Rand (GBP/ZAR) exchange rate will be left flat.