GBP/ZAR Exchange Rate Rocked by Second Wave Fears

The Pound to South African Rand exchange rate traded in a wide range last week in response to growing fears of a second wave of coronavirus infections.

What’s Been Happening: Rand Undermined by Coronavirus Resurgence Fears

The South African Rand was placed on the defensive through most of last week’s session, as market risk appetite was undermined by fears of a second wave of coronavirus infections.

This came in response to news that Beijing had reported a cluster of new infections linked to a major wholesale food market.

The Pound, meanwhile, got off to a strong start last week, rallying in response to Boris Johnson’s Brexit optimism and claims a trade deal with the EU could be completed in July with a ‘bit of oomph’.

However, things soured for Sterling in the latter half of the session after the Bank of England (BoE) announced it would be expanding its stimulus programme but cutting the pace of bond purchases.

This sharp downturn in the Pound allowed the Rand to recoup the majority of its losses, aided by President Cyril Ramaphosa’s announcement that lockdown restrictions would be eased further.

Three Things to Watch Out for This Week

1. UK Coronavirus Announcement

For GBP investors the focus this week will be on Boris Johnson’s latest coronavirus briefing, in which the PM will outline a further easing of coronavirus restrictions, included the reopening of the hospitality sector next month and the outcome of the government’s review into the 2m distancing rule.

2. South African Budget

Acting as the main catalyst for ZAR exchange rates this week will be Finance Minister Tito Mboweni’s emergency budget. Mboweni faces a difficult task in juggling financial response to the coronavirus whilst also not adding too much to the country’s already substantial debt pile.

3. South African Inflation

Also influencing the Rand this week will be South Africa’s latest CPI figures. Will a slump in inflation in April put more pressure on ZAR exchange rates?

GBP/ZAR Forecast

Looking ahead, the GBP/ZAR exchange rate is likely to remain volatile this week, with the easing of the UK’s coronavirus restrictions and South Africa’s emergency budget likely to result in some notable swings in movement.

Matthew Andrews

Contact Matthew Andrews