Pound to South African Rand (GBP/ZAR) Exchange Rate Dips as UK Heads into Second Covid-19 Lockdown

GBP/ZAR Exchange Rate Dips as UK Lockdown Dampens Nation’s Economic Outlook

The Pound to South African Rand (GBP/ZAR) exchange rate dipped today, with the pairing currently fluctuating around R20.986.

Sterling (GBP) fell today after Prime Minister Boris Johnson announced that the UK would enter a second national lockdown starting from this Thursday.

Consequently, GBP investors have become more pessimistic about the British economy, with fears rising over the possibility of a ‘double-dip’ recession in the fourth quarter.

In UK economic data, today saw the release of October’s Markit Manufacturing PMI which beat forecasts and rose from 53.3 to 53.7.

Rob Dobson, the director at IHS Markit, commented:

‘October saw the UK manufacturing recovery continue, albeit with the upturn losing momentum amid ongoing lockdown measures and signs that growth could weaken further in coming months after Brexit-related stockpiling.’

Brexit still remains a concern for GBP traders as UK-EU trade talks have shown no significant progress towards a post-Brexit trade deal.

South African Rand (ZAR) Rises Despite Rising Concerns Ahead of US Presidential Election

The South African Rand (ZAR) edged higher against the weaker Sterling today despite rising concerns over the US election.

Analysts at Nedbank said:

‘The markets continue to trade cautiously as they await the outcome of the U.S. elections this week and amid the ongoing and escalating effects of the increase in the number of COVID-19 infections.’

Consequently, investors are becoming increasingly worried that US political uncertainty could drag down demand for risky assets such as the South African Rand.

Nevertheless, the South African Rand’s gains have remained relatively steady. ZAR investors are now more confident that South Africa’s Covid-19 crisis could be improving.

Denis Chopera, a healthcare expert at Africa Research Institute, was optimistic about South Africa’s situation, commending the nation’s approach:

‘The experience [with the nation’s infections diseases] has come in handy, especially in countries such as South Africa where contact tracing already existed for tuberculosis. These were repurposed to combat Covid-19.’

Meanwhile, ZAR investors will be awaiting today’s release of the latest South African Total New Vehicle Sales figure for October.

Any improvement in South Africa’s vehicle sales would boost confidence in ZAR as the nation’s economic outlook improves.

GBP/ZAR Forecast: Could US Political Uncertainty Drag Down the South African Rand This Week?

Pound (GBP) investors will continue to monitor the UK’s coronavirus situation this week. If Covid-19 infection rates continue to rise, then Sterling would suffer on fears of an extended lockdown.

Meanwhile, Brexit developments will remain in focus. Again, any further indications that talks between the UK and the EU remain in deadlock would prove GBP-negative.

The South African Rand (ZAR) will remain sensitive to global risk sentiment.

The GBP/ZAR exchange rate could rise this week if US political uncertainty reaches fever pitch. This would weigh on demand for the risk-averse South African Rand.

David Moore

Contact David Moore