Relaxation of South African Travel Restrictions Drags on Pound South African Rand (GBP/ZAR) Exchange Rate
In the wake of South Africa President Cyril Ramaphosa’s decision to end a travel ban on tourists from high-risk countries the Pound to South African Rand (GBP/ZAR) exchange rate weakened.
This lifting of Covid-19 travel restrictions encouraged some renewed confidence in the outlook of the South African economy.
Increased levels of tourist arrivals would offer support to South African airlines, as well as the wider tourist industry, helping to potentially support economic activity in the final months of the year.
While the tourist industry is not the primary contributor to the South African gross domestic product any signs of economic revival could still limit anxiety over the country’s high debt burden.
As a result, this helped to shore up the South African Rand (ZAR) ahead of the weekend, even as the wider sense of market risk appetite eased.
GBP/ZAR Exchange Rate Downside Limited as UK GDP Anxiety Eases
Support for Pound Sterling (GBP) saw some recovery on Friday, however, as the initial impact of the underwhelming UK gross domestic product report began to fade.
GBP exchange rates pushed generally higher even as market focus increasingly turned towards ongoing discussions between the UK and EU.
Although the two sides paused trade talks ahead of the weekend, intending to resume on Monday, this was not enough to put any particular pressure on the Pound.
While the risk of officials failing to reach an agreement before Thursday’s deadline for a draft deal remains this had limited impact on GBP exchange rates at this stage.
Strengthening Business Confidence to Bolster South African Rand
The South African Rand may gain fresh traction on Monday with the release of October’s SACCI business confidence index.
With forecasts pointing towards the index picking up from 85.7 to 88 on the month this may give investors fresh cause for confidence.
Evidence of improving sentiment among South African businesses would further limit worries over the possibility of another underwhelming quarterly growth performance.
Even so, any fresh deterioration in the general sense of market risk appetite could still see the Rand come under pressure at the start of the week.
Brexit Deal Speculation Set to Weigh on GBP/ZAR Exchange Rate
Speculation over Brexit could dominate the outlook for the GBP/ZAR exchange rate in the coming days.
Unless the UK and EU appear on track to reach a deal before the imminent deadline fears of a potential no-deal scenario could see a resurgence.
With the UK economy already showing signs of weakness as a result of the second national lockdown and ongoing disruption from Covid-19 any fresh cause to doubt the outlook could weigh heavily on the Pound.
If the two sides are unable to reach a trade deal this could significantly raise the risk of the UK economy remaining in a state of slowdown for longer, boosting the odds of a double-dip recession.