GBP/ZAR Exchange Rate Slips to Seven-Month Low as Trade Dominated by US Election Drama

The Pound to South African Rand (GBP/ZAR) exchange rate tumbled to a new seven-month low last week, in a session dominated by the US presidential election.

What’s Been Happening: Rand Spurred Higher by Election Optimism

The South African Rand shot higher last week, rallying as Joe Biden’s victory in the US Presidential election helped to bolster market risk appetite.

However, the Rand’s advance did not come without its hiccups, with the Rand facing some pressure on Wednesday as early polling results showed a far narrower race than initially predicted.

The Pound, meanwhile, got off to a shaky start last week as GBP investors reacted to the news that England would be returning to lockdown.

News of a tight US election piled more pressure on Sterling in mid-week trade amidst concern that a contested election could delay a UK-US trade deal.

However, the Pound was able to claw back some of these losses in the latter half of the week after the Bank of England (BoE) announced a £150bn expansion to its quantitative easing programme.

Three Things to Watch Out for This Week

1. Coronavirus Developments

With the US election out of the way, we are likely to see the coronavirus pandemic return to the spotlight. Could this see the GBP/ZAR exchange rate remain under pressure as the news of a possible coronavirus vaccine helps to cheer markets?

2. Brexit Headlines

Ongoing UK-EU trade negotiations will continue to act as a key catalyst in the Pound this week, with Sterling potentially mounting a comeback if the two sides are able to close some of the gaps in talks.

3. UK GDP 

Also set to influence GBP exchange rates will be the publication of the UK’s latest GDP estimate. While growth is poised to rebound sharply in the third quarter, as the lifting of coronavirus restrictions over the summer unleashed pent-up demand, with the threat of another downturn in Q4 limit any upside in the Pound?

GBP/ZAR Forecast

Looking ahead, the GBP/ZAR exchange rate is likely to continue to trade in a wide range through the coming week as coronavirus and Brexit uncertainty dominates.

Matthew Andrews

Contact Matthew Andrews