The Pound to South African Rand (GBP/ZAR) exchange rate traded in a wide range last week, but ultimately closed the session lower as the Rand was turbo charged by improving market sentiment.
What’s Been Happening: Rand Wins in Risk-On Trade
The South African Rand struck higher latest week, being buoyed by a bout of market optimism, courtesy of a strong US jobs report and upbeat Chinese data.
Also buoying ZAR exchange rates was the news that South Africa had recorded its first current account surplus in 17 years in the first quarter of the year, thanks to strong trade figures.
However, it wasn’t all plain sailing for the Rand, as the currency faced some headwinds after South Africa’s latest GDP figures confirmed the nation’s recession deepened in the first quarter.
Meanwhile, the Pound fluctuated last week in response to Brexit and coronavirus concerns.
This saw Sterling fumble its mid-week gains as a lack of progress in UK-EU trade talks as well as the news that a local lockdown would be imposed on Leicester city in response to a spike in coronavirus cases spooked GBP investors.
Three Things to Watch Out for This Week
1. Coronavirus Headlines
Likely continuing to dominate market attention this week will be the ongoing coronavirus crisis. Will the recent surge of new cases in the US and other countries weigh on market sentiment and undermine the Rand’s gains?
2. UK Supplementary Budget
For GBP investors the spotlight this week will be on the Rishi Sunak’s ‘summer update’ and supplementary budget. Will the Chancellor be able to bolster confidence in the UK economy with the announcement of new stimulus measures?
Also continuing to influence Sterling sentiment will be ongoing Brexit trade talks. Expect to see the Pound weaken if the UK and EU remain in deadlock.
Looking ahead, the GBP/ZAR exchange rate is likely to remain highly volatile this week as coronavirus uncertainty and an emergency budget from the UK keeps investors on their toes.