Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Slides as British Retailers Turn Gloomy
UPDATE: The Pound Sterling South African Rand (GBP/ZAR) exchange rate plummeted by around -1% this afternoon. This left the pairing trading at around R21.4174.
The Pound plummeted against the Rand as risk appetite improved on Thursday afternoon, reversing this morning’s gains.
Added to this, Sterling slumped after data from the Confederation of British Industry (CBI) revealed British retailers remained downbeat in June.
The CBI showed 62% of retailers were pessimistic and feared weak consumer demand would prevent a recovery in retail sales.
CBI chief economist Rain Newton-Smith said:
‘Despite retailers working flat out to make sure they are safe and ready to open their doors, outside the grocery sector most retailers expect sales to be far below where they were this time last year.’
However, Pantheon Macroeconomics’ economist, Samuel Tombs said the CBI didn’t always track official statistics closely.
This could mean there may be a temporary recovery as shoppers made larger purchases after the lockdown prevented them from doing so earlier.
Although, Tombs was less confident about sales later in the year when the government’s furlough scheme is due to end. He expects sales to be down by -5% in the final quarter.
Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Jumps on Downbeat ZA Budget Speech
The Pound Sterling South African Rand (GBP/ZAR) exchange rate edged around 0.5% higher. This left the pairing trading at around R21.7400.
The South African Rand slumped lower this morning after a downbeat budget speech. The speech predicts a higher government deficit and increased debt.
Finance Minister Tito Mboweni’s speech also caused hopes for a quick global recovery fade, weighing on the Rand.
The South African finance minister revealed the budget deficit would widen to a record 14.6% of GDP in 2020/2021. While, public debt is expected to soar to 80% as the country borrowed more to help offset effects of the coronavirus pandemic.
These downbeat expectations were largely expected by markets, which limited some ZAR losses. In some cases the forecast from Mboweni was more optimistic than others.
The Treasury expects GDP in 2020 to contract by -7.2% whereas the International Monetary Fund (IMF) expects a -8% slump.
Although, traders moved away from the riskier Rand as the government’s lack of detail about the plans to revive growth weighed on market mood.
Sterling (GBP) Rebounds After Recent Dip
The Pound was able to make gains against a weaker South African Rand today as traders bought back into the British currency.
GBP was able to make some gains today after its recent dip, although worries about a Brexit deal and a second wave of the coronavirus limited gains. This kept the rebound in check on Thursday.
While analysts have said there is no new specific development that has buoyed Sterling against a handful of currencies, a weaker Euro (EUR) and some level of calm returning to markets offered some support.
However, Sterling still remains weak as it is roughly at the same levels as early May vs the US Dollar (USD). Against the Euro, the currency remains close to earlier three-month lows.
In a research note, ING analysts wrote:
‘Negatives seem to be piling up for GBP as the UK may (a) face a second virus outbreak right as it attempts to re-establish normality, and (b) get caught in U.S. protectionist fire.’
Brexit pessimism also weighed on the currency as traders fret over whether Britain will be able to secure a trade deal with Brussels.
Sterling suffered losses during yesterday’s session after the bloc’s chief negotiator said the UK needed to give clear signals it was ready to work towards a deal.
Pound South African Rand Outlook: Risk Appetite and Business Confidence in Focus
Looking ahead, the Pound (GBP) could make further gains against the South African Rand (ZAR) if risk appetite continues to fall.
If Friday also sees a huge decrease in risk appetite, it will send the Rand lower.
However, the South African Rand could claw back some losses following the release of SACCI’s Business Confidence data.
If business confidence rises higher than expected in May, it will leave the Pound South African Rand (GBP/ZAR) flat.