Pound to South African Rand (GBP/ZAR) Exchange Rate Sinks as South Africa Eases Covid-19 Lockdown Restrictions

GBP/ZAR Exchange Rate Falls as China Agrees to Speed Up Purchases of US Farm Goods

The Pound to South African Rand (GBP/ZAR) exchange rate fell by -0.4% today, with the pairing currently trading around R21.554.

The South African Rand (ZAR) has benefited from South African President Cyril Ramaphosa’s easing of the nation’s lockdown restrictions.

Mr Ramaphosa did however warn that ‘this task is far from complete. Even after 100 days, we are still near the beginning of this epidemic and it will remain with us for many more months, possibly years.’

Nevertheless, ZAR has benefited from growing hopes that South Africa’s economy could begin to recover now that restrictions are eased.

Today also saw reports that China would increase its purchases of US farm goods, leaving many investors confident that US-China trade relations could be improved.

US Secretary of State Mike Pompeo also recently tweeted:

‘During my meeting with CCP Politburo Member Yang Jiechi, he recommitted to completing and honouring all of the obligations of phase 1 of the trade deal between our two countries.’

As a result, growing hopes for global economic stability have boosted risk-sentiment and directly benefited the risk-sensitive South African Rand (ZAR).

Pound (GBP) Falls Despite UK’s Covid-19 Alert Level Being Lowered from 4 to 3

The Pound (GBP) failed to gain even after Matt Hancock, the Health Secretary, hailed the ‘big moment’ as the UK’s Covid-19 alert level was lowered from 4 to 3.

Mr Hancock celebrated the ‘testament to the British people’s determination to beat the virus’. He also added:

‘The government’s plan is working. Infection rates are rapidly falling, we have protected the NHS and, thanks to the hard work of millions in our health and social care services, we are getting the country back on her feet.’

Meanwhile, today saw the release of the latest UK Government borrowing figures, which hit a record of £55 billion in May.

Chancellor Rishi Sunak said:

‘Today’s figures confirm that coronavirus is having a severe impact on our public finances.’

Today also saw the release of the UK’s retail sales figures for May, which beat forecasts and rose from -18% to 12%. As a result, some investors have become more confident that the UK’s retail sector could improve in the months ahead.

GBP/ZAR Forecast: Could Plummeting Risk Sentiment Drag Down the South African Rand Next Week?

ZAR investors will be looking ahead to Tuesday’s release of SA’s unemployment rate figure for the Q1. However, if this continues to rise, we could see ZAR shed some of its gains.

Risk-sentiment will also continue to drive the ZAR/GBP exchange rate next week. Any further signs of US-China trade tensions would prove ZAR-negative.

The GBP/ZAR exchange rate will remain sensitive to any changes in the UK’s coronavirus situation next week. However, we could see Sterling rise against ZAR if risk-sentiment continues to dampen.

David Moore

Contact David Moore