Boost in Risk Appetite Leaves the Pound South African Rand (GBP/ZAR) Exchange Rate Flat

Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Muted Following Fed Meeting

The Pound Sterling South African Rand (GBP/ZAR) exchange rate remained largely flat today, leaving the pairing trading at around R22.5968.

Both GBP and ZAR benefitted from an upswing in risk appetite following the US Federal Reserve’s meeting.

The Fed left the door open to further monetary policy easing on Wednesday. Although, the bank dampened any expectations of a quick economic recovery from the coronavirus crisis.

However, optimism increased as more and more countries are taking steps to re-open economies as new infections slow.

Risk appetite was also boosted by encouraging results from a coronavirus treatment trial.

The improvement of sentiment boosted ZAR and offset the imminent exclusion of South Africa’s government bonds from the World Government Bond Index (WGBI).

Government bonds were set to fall out of the WGBI at the end of April after Moody’s downgraded South Africa’s credit rating.

Meanwhile, ZAR was left flat as S&P Global Ratings downgraded the country’s credit rating further, noting Covid-19 pressures will have adverse complications.

In a statement issued on Wednesday, S&P wrote:

‘South Africa’s already contracting economy will face a further sharp COVID-19-related downturn in 2020.

‘The COVID-19 health crisis will create additional and even more substantial headwinds to GDP growth, owing to a strict five-week domestic lockdown, the markedly weaker external demand outlook, and tighter credit conditions.’

Sterling (GBP) Flat as UK Coronavirus Deaths Exceed 26,000

The Pound remained flat on Thursday as the currency was driven by global risk appetite and the fact the country is lagging behind its European counterparts in planning to ease lockdown restrictions.

Britain now has the second-highest level of coronavirus deaths in Europe, with the death toll jumping to more than 26,000. The country is now closely lagging behind Europe’s worst-hit country, Italy.

Experts have said that the number of deaths could be even higher. The country is also expected to have the worst Covid-19 death tolls in Europe.

Due to this, Boris Johnson’s government has said that it is too early to talk about easing the current lockdowns. The government also added that it would not review social distancing guidelines until 7 May.

Pound South African Rand Outlook: Manufacturing PMIs in Focus

Looking ahead, the Pound (GBP) could suffer losses against the South African Rand (ZAR) following the release of Markit’s final UK manufacturing PMI.

If April’s manufacturing PMI slumps further than expected it will weigh on Sterling.

Meanwhile, the Rand could also suffer losses if the country’s ABSA manufacturing PMI plummets further into contraction.

If South Africa’s manufacturing sector slumps further past 50, it will leave the Pound South African Rand (GBP/ZAR) flat.

Millie Empson

Contact Millie Empson