South African Rand Rises as China’s Economy Grows in the Fourth Quarter of 2020
The GBP to South African Rand (ZAR) exchange rate rose by 0.5% today, with the pairing presently fluctuating around R20.78.
The South African Rand benefited from news that China’s GDP grew by 6.5% year-on-year in the fourth quarter, up from 4.9%.
China’s National Bureau of Statistics commented:
‘The national economy recovered steadily, employment and living standards were ensured forcefully, and the main goals and tasks of economic and social development were accomplished better than expectation.’
As a result, demand for the risk sensitive ZAR has risen, with the world’s second-largest economy showing steady signs of recovery in 2021.
Also, with China being South Africa’s largest trading partner, traders are becoming more confident to invest in the South African Rand.
However, ZAR investors are becoming increasingly concerned over the lack of clarity over South Africa’s Covid-19 vaccine strategy.
Democratic Alliance leader John Steenhuisen said:
‘We’ll need to start a mass rollout by March or April, at the very latest, to avoid a third wave as we head into winter. So, getting 20 million – or 200 million for that matter – in August or September is not an achievement, it’s a failure.’
Any further signs of political tensions between South Africa’s leading party and the opposite, Democratic Alliance, could drag down the South African Rand.
Pound Falls Despite London Trialling 24/7 Covid-19 Vaccination Centres
The Pound fell against ZAR today despite London gearing up to trial the first 24-hour Covid-19 vaccination centres outlined by the Government last week.
GBP traders are, however, concerned that a shortage in supply of coronavirus vaccines could slow down Downing Street’s plans for large-scale vaccinations of the vulnerable to be completed by mid-February.
UK vaccine minister Nadhim Zahawi commented:
‘If you just want to chase volume, chase speed, and not accuracy, 24 hours works really well. But if you want to chase both accuracy, protecting the most vulnerable and of course speed, then you want to do what we’re doing, which is primary care networks, hospitals, large vaccination centres, and of course pharmacies last week.’
In UK economic data, today saw the release of the Rightmove House Price Index for January, which fell by -0.9% month-on-month.
Tim Bannister, Rightmove’s director of property data, commented:
‘These major influences on mover behaviour are clouding the 2021 outlook, but Rightmove’s early January market-leading indicators of buyer demand and the number of actual sales being agreed are looking robust.’
GBP/ZAR Forecast: Could the South African Rand Rise as China’s Economy Improves?
Pound traders are awaiting tomorrow’s speech from Andrew Haldane, the Chief Economist at the Bank of England (BoE).
Any downbeat comments about the state of the British economy, however, would prove GBP-negative.
Meanwhile, GBP investors will be monitoring the UK’s Covid-19 situation, with any signs of the Covid-19 vaccination programme being on target boosting the GBP/ZAR exchange rate.
However, the South African Rand could continue to head higher this week, with demand for the risk-sensitive currency benefiting from signs that China – the world’s second-largest economy – is on course for recovery.