The Pound to South African Rand (GBP/ZAR) exchange rate struck higher last week as traders expressed their relief that the UK would not face a no-deal Brexit in 2021.
What’s Been Happening: Brexit Deal Cheered by Markets
The Pound strengthened last week, as the UK’s last-minute trade deal with the EU was met by cheers from GBP investors.
While many analysts had their reservations about the deal, particularly given that it doesn’t cover the vital service sector, Sterling was nevertheless able to plot a course higher throughout the week, accelerating in the second half of the week after the deal passed through parliament.
Meanwhile the South African Rand faced some pressure through last week’s session after South African President Cyril Ramaphosa announced that coronavirus restrictions would need to be tightened as a highly infectious new variant of the virus spread rapid through the country.
However, the Rand still found some limited support last week thanks to a prevailing risk-on mood in markets.
Three Things to Watch Out for This Week
1. UK Lockdown
Surging coronavirus cases has seen England and Scotland plunged back into lockdown this week, with concerns over how this will impact the UK economy likely to cap any upside in the Pound.
2. UK Services PMI
Also influencing GBP exchange rates may be the UK’s latest services PMI. December’s preliminary figures suggested the service sector fell back into a narrow contraction, but will the finalised reading see growth revised higher?
3. South African Coronavirus Developments
ZAR investors are likely to keep a close eye on South African coronavirus new particularly regarding the procurement of vaccines, as analysts grow increasingly concerned about the potential economic impact of a slow rollout of the vaccine.
Looking ahead, the GBP/ZAR exchange rate is likely to trade in a wide range this week, as coronavirus headlines infuse the pairing with volatility.