The Pound to South African Rand (GBP/ZAR) exchange rate traded in a wide range again last week as a result of heightened Brexit and coronavirus uncertainty.
Last Week: Pound Dented by Brexit Setbacks
The Pound initially rallied last week as GBP investors expressed their relief after Boris Johnson’s new tier-based coronavirus restriction system saw most of the UK avoid the strictest restrictions.
However Sterling sentiment quickly soured amidst concerns over a lack of Brexit progress ahead of the UK’s self-imposed deadline.
While the Pound rallied in mid-week on reports the UK would offer some wiggle room on this deadline, this proved to be a dead-cat bounce with Sterling plunging again on the news that millions of people in London and other parts of the UK were being placed in stricter lockdown measures.
At the same time, the South African Rand struggled in broader trade last week, with fading US stimulus hopes and a sharp selloff in equity-markets denting market risk appetite.
The Rand also struggled in the wake of President Cyril Ramaphosa’s economic recovery plan as it failed to impress markets.
Three Things to Watch out for This Week
- Coronavirus Developments
Coronavirus concerns are likely to remain a key concern for both GBP and ZAR investors this week. Will surging cases spook investors or could more vaccine optimism help to cheer markets?
- Brexit Drama
Acting as the key catalyst for the Pound this week will be the ongoing uncertainty surrounding Brexit, with Sterling vulnerable to additional losses so long as the UK government maintains that talks are ‘over’.
- UK PMIs
Also set to influence GBP exchange rates this week will be the latest UK PMI releases, with a notable slowing of private sector activity this month likely to weigh heavily on the Pound.
Looking ahead, trade in the GBP/ZAR exchange rate is likely to remain volatile this week, and Brexit and the coronavirus pandemic continue to dominate headlines.