Pound to South African Rand Exchange Rate Sustains Gains as Risk-Aversion Intensifies
Updated 16:39 BST 03/04/2020:
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is on track to end this week near its best levels since the 2016 Brexit vote.
Since earlier in the session, market risk-aversion has only intensified. Investors are even more hesitant to take risks on currencies like the South African Rand (ZAR) after the day’s shockingly bad ecostats from major economies.
The Pound has been much less impacted by coronavirus risk-aversion than the Rand.
As a result, GBP/ZAR continued to trend high in the interbank region of 23.08. This is just below the pair’s best levels in over three years.
(Originally published 11:08 BST 03/04/2020)
Pound to South African Rand Exchange Rate Keeps Gaining on South Africa’s Bleak Outlook
As the South African Rand (ZAR) continues to tumble, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate keeps climbing. Even amid a lack of particularly supportive UK news, the Pound (GBP) has reached its best levels versus the Rand in years.
The Rand’s significant weakness has led to huge GBP/ZAR gains in recent weeks. Following last week’s massive jump of over a Rand, GBP/ZAR continues to climb.
GBP/ZAR opened this week at the interbank level of 21.95 and has been trending with an upside bias since.
At the time of writing on Friday, GBP/ZAR trends just below a three-year-best of 23.15. This was the best level for the pair since the 2016 Brexit vote.
South Africa’s outlook is struggling amid the coronavirus pandemic. With the nation’s economy in a gloomy position, the Rand continues to fall allowing for rival currencies to make easier gains.
Pound (GBP) Exchange Rate’s Losses on PMIs Limited by Rand Weakness
After seeing mostly bullish movement throughout this week so far, the Pound (GBP) ran into more turbulence on Friday.
Sterling had been benefitting from improved liquidity in markets since last week’s impressive US stimulus packages. It had also been benefitting from weakness in rival currencies.
However, today’s dire UK PMI results put fresh pressure on Sterling. They were even worse than already shocking projections, which made investors concerned that Britain’s economy would be even more heavily hit by the coronavirus pandemic than feared.
UK Composite Output PMI ⬇️ to 36.0 in March, led by a slump in services activity as shops were closed to slow the COVID-19 outbreak. Latest PMI figures consistent with an over 1.5% qr/qr fall in GDP. More: https://t.co/73y7CXKyEZ pic.twitter.com/FQ51W3s5Ae
— IHS Markit PMI™ (@IHSMarkitPMI) April 3, 2020
As a result of the shocking data, Sterling slipped from weekly highs against some major currencies. This made it harder for GBP/ZAR to hold its best levels.
South African Rand (ZAR) Exchange Rates Pressured by South Africa’s Bleak Outlook
The South African Rand (ZAR) has had yet another terrible and bearish week. The currency’s fortunes have only worsened as South Africa struggles with lockdown and the nation loses its only remaining investment-grade credit rating.
Not only has the credit rating downgrade hurt South Africa’s overall economic outlook, the nation is struggling hard with the coronavirus pandemic.
The nation is a heavy exporter of commodities, and commodity trade has been hugely hit by the outbreak. South Africa’s lockdown is also among the strictest in Africa.
According to Analysts at NKC Economics:
‘The domestic currency has been dealt blows from all sides,
South Africa’s economic fundamentals are dismal, and the external environment has grown increasingly hostile. The loss of South Africa’s investment-grade status exerts further pressure on the rand, which is already teetering due to the economic damage inflicted by Covid-19.’
Pound to South African Rand (GBP/ZAR) Exchange Rate Rally Could Keep Going
While the latest UK data has been disappointing, analysts still predict that the Pound (GBP) could climb further.
As the British currency continues to claw back ground from rivals, Sterling could keep advancing. Its gains may be limited, but potential developments in UK fiscal stimulus could give it a boost.
Pound investors are hoping the UK government will introduce further fiscal stimulus measures to tackle the coronavirus. If the UK Treasury does introduce new stimulus, the Pound will have stronger support to advance on.
The South African Rand (ZAR), on the other hand, is likely to remain under pressure amid South Africa’s gloomy outlook.
Developments over how South Africa is coping under lockdown, as well as global shifts in risk-sentiment, will also influence the Pound to South African Rand (GBP/ZAR) exchange rate.