The Pound to South African Rand exchange rate was able to edge higher on Tuesday morning as attention turned to the US Federal Reserve meeting which is expected to reaffirm its dovish stance. Meanwhile, Sterling received some support on Monday after the EU’s chief Brexit negotiator, Michel Barnier expressed optimism and confidence that a UK-EU deal was possible during a closed-door meeting.
What’s Been Happening: SARB Sends Rates to Record Low
Thursday saw the pairing continue to rise as the Reserve Bank of South Africa slashed rates for the fifth time this year, leaving it at a record low as the economy continues to be strangled by the coronavirus pandemic.
The Pound continued to make gains at the end of the week after the release of Britain’s upbeat flash PMIs. Businesses in the UK reported their quickest upturn in five years and shoppers increased spending, sending it back towards pre-lockdown levels.
Three Things to Watch Out For This Week:
- Federal Reserve Meeting
Looking ahead, due to little data scheduled this week, the Rand could continue to react to the latest US Federal Reserve meeting. While no policy change is expected investors are expecting to hear the bank reiterate its super-easy outlook which could boost the South African Rand.
- Risk Appetite
The South African Rand is also likely to react to any changes in risk appetite this week as traders nervously await Friday’s deadline for US Congress to extend the current unemployment benefits. Upbeat reports could boost risk appetite and offer ZAR some support.
- Brexit
Sterling will continue to react to Brexit and any further positive reports about UK-EU negotiations is likely to boost the currency. If the bloc’s chief Brexit negotiator reiterates what anonymous sources are stating he said during a closed-door meeting, it will boost GBP against the Rand.
GBP/ZAR Forecast
Looking ahead, the GBP/ZAR exchange rate is likely to make some gains over the course of the week if the current round of UK-EU Brexit negotiations proves to be more successful than last week’s talk which ended with the UK and EU clashing.