GBP/ZAR Exchange Rate Falls as Covid-19 Vaccine Hopes Buoy South African Rand
The Pound to South African Rand (GBP/ZAR) exchange rate dipped by 0.2% today, with the pairing currently trading around R21.464.
The South African Rand (ZAR) edged higher today after South African President Cyril Ramaphosa eased one of the world’s strictest lockdowns to ease the nation’s severe economic strain.
However, President Ramaphosa warned that South Africa’s Covid-19 situation could get a lot worse, saying:
‘We should expect that these numbers will rise even further and even faster. The coronavirus pandemic in South Africa is going to get much worse before it gets better.’
Furthermore, ZAR has also benefited from risk-on market mood today, with nations worldwide continuing to ease Covid-19 restrictions to recover their own economies.
The ZAR/GBP exchange rate has also edged higher on hopes of a coronavirus vaccine. This follows news that the American biotech company, Novavax, has begun its first human study into its experimental vaccine or the virus.
Dr. Gregory Glenn, the company’s research chief, commented:
‘We are in parallel making doses, making vaccine in anticipation that we’ll be able to show it’s working and be able to start deploying it by the end of this year.’
As a result, South African Rand (ZAR) investors are becoming increasingly optimistic that the world’s economy could recover faster-than-expected. Any further signs of success with the vaccine trials would prove ZAR-positive.
Pound (GBP) Sinks as Brexit Woes Weigh on Sterling
The Pound (GBP) preformed well against safe-haven currencies like the Euro and US Dollar this morning. However, GBP has remained subdued against riskier assets as risk-on market mood has benefiting such currencies as the South African Rand (ZAR).
Already, many investors are moving on from this weekend’s controversy over Prime Minister Boris Johnson’s advisor, Dominic Cummings. However, Brexit has moved back into focus as investors are becoming more concerned over UK-EU relations going forward.
Vassilis Karamanis and Anooja Debnath at Bloomberg explain:
‘The current Brexit transition period finishes at year-end, which means Britain and the European Union have only until then to forge a new trade deal in order to avoid tariffs and quotas. The other option is to extend the interim period — and the last date to do so is June 30. Talks between negotiators resume on June 1, after this month’s discussions made little progress.’
Today also saw the Bank of England’s (BoE) chief economist Andy Haldane rule out the idea that the bank could take interest rates into negative territory.
In UK economic data, today saw the release of the UK CBI Distributive Trades Survey for May. However, this slipped by -50% and left many Sterling traders concerned for the British economy’s health in the months ahead.
GBP/ZAR Forecast: South African Rand Could Continue to Rise on Risk-On Mood
South African Rand (ZAR) investors will be looking ahead to Thursday’s release of the SA PPI data for March. However, if South Africa’s economy continues to suffer – which is highly likely – then we could see the ZAR’s gains deteriorate.
Meanwhile, risk-sentiment will continue to drive the risk-sensitive South African Rand. Any further signs of vaccine trials or an improving global economic situation would prove ZAR-positive.
The GBP/ZAR exchange rate will continue to be influenced by the UK’s coronavirus situation this week. Any further signs that the nation could ease its lockdown measures and encourage the economy’s recovery would benefit the Pound.