Near Quarterly Lows for Pound to South African Rand (GBP/ZAR) Exchange Rate as Rand Sturdy

Pound to South African Rand Exchange Rate Fails Recovery Attempt

Updated 16:33 BST 08/06/2020:

A brief jump in the Pound to South African Rand (GBP/ZAR) exchange rate today was short-lived. The Pound is struggling to mount gains against currencies more correlated to rising risk-sentiment. It is also being held back by Brexit jitters.

Despite South Africa’s mixed domestic outlook, the currency continues to benefit strongly from risk-sentiment and is holding its ground. According to Michael Nderitu, Head of Trading at AZA:

‘A cross-continental easing in restrictions on economic activity — in some cases spurred by protests, as in Senegal — furthered the recovery in currencies this week from South Africa to Kenya,

While a heavy economic toll continues, we see the reopening of businesses and markets, helped by easing of monetary and fiscal policies, steadying or strengthening currencies near term.’

(Originally published 11:52 BST 08/06/2020)

Pound to South African Rand Exchange Rate Remains Under Pressure 

Amid improving global sentiment, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has been falling. The South African Rand (ZAR) is benefitting strongly from the market’s shift in sentiment. Meanwhile the Pound’s (GBP) appeal is limited by Brexit jitters. 

Hopes over the coronavirus pandemic have led to huge GBP/ZAR losses in recent weeks. Last week saw GBP/ZAR lose around a third of a Rand and close the week near the interbank level of 21.36. 

GBP/ZAR has also been trending near its lowest levels in months over the past week. At the time of writing, it is trending close above last week’s quarterly low of 21.15. 

Looking ahead, the Pound could be in for further weakness as well. While economic hopes are rising, are rising, concerns over the future of Britain’s relationship with the EU are likely to worsen. 

Pound (GBP) Exchange Rate Losses Limited as Britain’s Economy Plans Reopening 

The Pound (GBP) has actually performed fairly well overall over the past week or so. With the UK government planning to reopen more of the economy from the coronavirus pandemic soon, investors find the Pound appealing. 

However, its appeal has been limited by Britain’s mixed economic stats in the face of the pandemic. On top of this, Brexit jitters are returning as the deadline to extend the transition period draws closer. 

According to Viraj Patel, FX and global macro strategist at Arkera: 

‘We could see the Pound tread water around these levels in absence of any further positive catalysts and investors take stock of what will happen next in broader markets – especially ahead of the Fed meeting later this week. However, with Brexit headwinds also coming to the forefront of investors – the risks are mildly tilted to the downside for the Pound this week.’ 

South African Rand (ZAR) Exchange Rates Still Gaining on Risk-Sentiment 

The South African Rand (ZAR) is a currency often correlated to market risk and emerging market sentiment. As a result, it has benefitted strongly from the market’s improving mood in recent weeks. 

Major governments have been slowly unveiling plans to reopen economies from the coronavirus pandemic. Major economies have also been showing signs of weathering the pandemic better than expected. 

This is making investors more willing to take risks amid hopes that there could be a solid economic rebound. It is the primary cause of Rand strength lately. 

ZAR has also received a boost from news that South Africa’s government was seeking a loan to help with deficits from the IMF. 

As a result of these factors, ZAR investors have been able to more easily overlook concerns about South Africa’s own worsening coronavirus figures. 

Pound to South African Rand (GBP/ZAR) Exchange Rate Losses Could Continue if Pound Weakens 

While the Pound (GBP) has been holding its ground in recent sessions, many analysts believe there could be fresh weakness ahead. The outcome of the Brexit process is seeing rising speculation again. 

Once June is over, it will be too late for Britain to ask for an extension to the Brexit transition period. It would mean that if no UK-EU trade deal is reached, Britain will see a cliff-edge scenario at the end of 2020. 

As a result, investors will increasingly focus on Brexit news in the coming weeks. This could keep a cap on the Pound or even lead to losses if developments are disappointing. 

As for the South African Rand (ZAR), it may continue to benefit from global sentiment even if domestic data disappoints. On the other hand, if upcoming South African unemployment and production stats impress the Rand will be even more appealing. 

Pound to South African Rand (GBP/ZAR) exchange rate investors will also be keeping an eye out for UK growth and trade data due at the end of the week.

Josh Jeffery

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