The Pound to South African Rand (GBP/ZAR) exchange rate traded in a wide range last week, as renewed coronavirus jitters infused fresh volatility in the pairing.
What’s Been Happening: Rand Dented by Coronavirus Sell-Off
The South African Rand found itself on the defensive through much of last week’s session, as the emerging market currency got caught up in a wider sell-off as coronavirus panic swept through markets.
The Rand then faced some additional pressure as South Africa’s mid-term budget failed to convince investors that the government has a plan to alleviate its swelling debt pile.
But ZAR exchange rates were eventually able to bounce back in the second half of the week, amidst a modest pull back in the US Dollar.
Meanwhile, the Pound got to a fairly robust start last week. Sterling sentiment strengthening in response to some positive signals regarding UK-EU Brexit trade talks.
However, this would give way to some GBP selling later in the week, amidst growing speculation the UK government was preparing to impose a second nationwide lockdown in England as coronavirus cases surged to alarming levels.
Three Things to Watch Out for This Week
1. Coronavirus Developments
Continuing to act as a key catalyst of movement in the GBP/ZAR exchange rate this week will be any headlines pertaining to the coronavirus pandemic. With the Rand likely to prove particularly sensitive to any more negative developments.
2. US Election
Another key focus for ZAR investors will be this week’s US presidential election, with the risk sensitive Rand potentially facing some headwinds if concerns over a contested result sours market sentiment.
3. BoE Stimulus
Later in the week we will see the Bank of England (BoE) conclude its latest policy meeting in which it is widely expected to expand its quantitative easing programme. But will this be enough to cheer the Pound as the UK enters a second lockdown?
Looking ahead, trade in the GBP/ZAR exchange rate is likely to remain highly volatile this week as markets face renewed concerns over global growth and the potential for a drawn-out election result in the US.