Pound to South African Rand (GBP/ZAR) Exchange Rate Steady as South Africa’s PPI Beats Forecasts

GBP/ZAR Exchange Rate Rangebound as South Africa Could Face Further Covid-19 Lockdowns

The Pound to South African Rand (GBP/ZAR) exchange rate held steady, with the pairing currently trading around R20.29.

The South African Rand (ZAR) failed to gain on Sterling today despite the release of South Africa’s Producer Price Index (PPI) for November, which beat forecasts and rose from 2.5% to 2.7%.

Analysts at Reuters commented:

‘Inflation has been modest this year, dropping below the central bank’s 3-6% target range during a hard coronavirus lockdown that led to a steep economic contraction.’

However, with considerations for further lockdowns for South Africa’s key Covid-19 hotspots, ZAR investors are remaining cautious.

Dr Keith Cloete, the principal head of health in South Africa, commented:

‘We will have to look (at) and explore local restrictions. If people do not behave in a way that will help us, we might have to become much more tough in the way that we impose restrictions locally in the Western Cape.’

Nevertheless, hopes of a coronavirus vaccine rollout in the next few months has continued to buoy confidence in the risk-sensitive South African Rand.

Pound (GBP) Steady as EU is Willing to be ‘Creative’ to Secure Post-Brexit Trade Deal

The Pound (GBP) held steady today after the European Commission’s (EC) President, Ursula von der Leyen, said that the European Union (EU) was willing to be ‘creative’ to secure a UK-EU Brexit trade deal.

However, with no clear signs of Downing Street being willing to concede on a trade agreement, GBP investors are remaining cautious.

Today also saw a decline in UK car production, which fell by -13.6% to 18,629, with worse to come if the UK leaves the EU without a trade deal.

Mike Hawes, the SMMT’s Chief Executive, commented:

‘These figures are yet more bad news for an industry battered by Covid, Brexit and, now, the unprecedented challenge of a complete shift to electrified vehicles in under a decade. While the sector has demonstrated its resilience, we need the right conditions to remain competitive both as a manufacturing nation and a progressive market.

‘Above all, we must have a Brexit deal, one with zero tariffs, zero quotas and rules of origin that benefit existing products and the next generation of zero emission cars, as well as a phase in period that allows this transition to be ‘made in Britain’.’

Yesterday also saw Chancellor Rishi Sunak warn that the UK’s economic crisis had only just begun.

Consequently, demand for GBP appears to be slipping as the outlook for Britain’s economy is  looking increasingly darker as the year draws to a close.

GBP/ZAR Forecast: Could Brexit Optimism Continue to Fade?

The Pound (GBP) could become more subdued towards the end of the week as UK economic uncertainty continues to edge higher on a lack of Brexit consensus.

As a result, we could see UK market mood quickly deteriorate as we enter December, with concerns that the UK could leave the EU without a trade agreement by the end of the year.

Meanwhile, the South African Rand (ZAR) could continue to head higher as risk sentiment improves.

Any further comments about a rollout of a Covid-19 vaccine would also prove ZAR-positive.

The GBP/ZAR exchange rate will likely remain steady, however, as the outlook for South Africa’s economy, too, remains largely uncertain.

David Moore

Contact David Moore