The Pound to South African Rand (GBP/ZAR) exchange rate traded in a wide range last week as coronavirus vaccine news dominated markets.
What’s Been Happening: Rand Finds Fleeting Gains on Vaccine News
The South African Rand rocketed to a seven-month high at the start of last week as the emerging market currency was turbo-charged by the ‘Biden bounce’ as well as an announcement from US pharmaceutical giant Pfizer that its experimental vaccine has shown 90% effectiveness.
However, the Rand was unable to sustain these gains for long, with the currency retreating through mid-week trade, amidst lingering US political uncertainty.
These losses were then compounded by the publication of South Africa’s latest jobs figures as unemployment soared to a record high in the third quarter.
The Pound, meanwhile, bounced back from its initial slump against the Rand on the back of some positive wage growth figures as well as hopes that the coronavirus vaccine could significantly benefit the UK, given its economy has been one of the hardest hit by the pandemic.
However, these gains were trimmed in the latter half of the session after the UK’s third quarter GDP figures printed below expectations.
Three Things to Watch Out for This Week
1. Coronavirus Developments
The GBP/ZAR exchange rate is likely to remain highly sensitive to coronavirus developments this week, with the pairing already coming under some pressure with the announcement of Moderna’s new vaccine candidate.
2. Brexit Headlines
Ongoing UK-EU trade talks will be the focus for GBP investors this week. Will the two sides be able to finalise an agreement in time for this week’s EU summit of leaders?
3. SARB Rate Decision
For ZAR investors the spotlight this week will be on the South African Reserve Bank (SARB) as it delivers its final rate decision of 2020. While the current consensus is that the SARB will leave its monetary policy untouched, some analysts suggest there is scope for some easing this month.
Looking ahead, trade in the GBP/ZAR exchange rate is likely to remain volatile this week as coronavirus and Brexit developments continue to dominate market sentiment.