GBP/ZAR Exchange Rate Dips as UK Jobs Still as Risk Despite New Stimulus Measures
The Pound to South African Rand (GBP/ZAR) exchange rate is on the defensive this morning, as concerns over the UK’s new stimulus measures weighs on the pairing.
At the time of writing the GBP/ZAR exchange rate is trading at around ZAR21.3075, slightly down from this morning’s opening levels.
Pound (GBP) Sidelined by Fears of Mass Unemployment
The Pound (GBP) finds itself on the back foot against the South African Rand (ZAR) this morning, as concerns over Rishi Sunak’s recently announced stimulus measures appear to be dragging on Sterling sentiment.
The Chancellor outlined a stimulus package worth £30bn during Wednesday’s ‘summer update’. Branded by Sunak as his ‘plan for jobs’, the new stimulus measures are largely targeted at helping to retain and create new jobs amidst the ongoing coronavirus crisis.
— BBC Politics (@BBCPolitics) July 8, 2020
While GBP investors welcomed the additional fiscal support, there are already concerns that the measures don’t go far enough and that the UK still faces a ‘cliff-edge’ of mass unemployment when the government’s furlough scheme expires in October.
Len McCluskey, the general secretary of the Unite union, said:
‘With no modification to the JRS, that dreaded October cliff edge for businesses and workers has now been set in stone. Our fear is the summer jobs loss tsunami we have been pleading with the government to avoid will now surely only gather pace.’
Sunak himself admits that he will not be able to protect every single job and warns ‘there are going to be difficult times ahead’.
Unsurprisingly, the threat of massive unemployment has not exactly inspired confidence in GBP investors, and is likely to temper any upside in Sterling going forward.
South African Rand (ZAR) Surges Amidst US Dollar (USD) Sell-Off
At the same time, the South African Rand (ZAR) remains buoyed this morning as the recent sell-off of the US Dollar (USD) sent investors flocking toward high-yield emerging currencies.
However, it’s unclear how long the Rand will be able to hold on to these gains in light of growing headwinds.
These include concerns over the recent spike in coronavirus cases around the world as well as South Africa’s upcoming manufacturing production figures, which are expected to report a collapse of factory output in April.
GBP/ZAR Exchange Rate Forecast: Brexit Concerns to Weigh on Sterling?
Looking ahead, the Pound to South African Rand (GBP/ZAR) exchange rate may come under additional pressure through the latter half of the week as the latest round of Brexit talks come to a conclusion.
Despite optimism from Boris Johnson that a deal could be reached in July with a ‘bit of oomph’, so far the ‘intensified’ talks have failed to deliver much progress.
Expect this to result in Sterling facing additional pressure if the UK and EU continue to talk of ‘significant differences’ when this week’s round of negotiations come to a close.
At the same time, the Rand remains vulnerable to potential downside risks as concerns over the coronavirus crisis continue to grow.
This may see ZAR exchange rates weaken in the coming days if second wave fears reach critical mass.