The Pound to South African Rand (GBP/ZAR) exchange rate traded in a wide range last week, as Joe Biden’s inauguration created a temporary improvement in market sentiment.
What’s Been Happening: Rand Finds Fleeting Gains on US Stimulus Optimism
The Rand rocketed higher through the start of last week’s session, as a clear risk-on bias emerged ahead of Joe Biden’s inauguration as the 46th US President.
This ‘Biden bounce’ was driven by the new administration’s plans for a massive stimulus package, as well as its desire to provide clear leadership through the current pandemic.
However, the Rand was unable to sustain these gains through the latter half of the week, with the emerging market currency relinquishing almost all of its gains as market sentiment began to sour.
Meanwhile, trade in the Pound was equally mixed last week. GBP investors were impressed by the UK’s vaccination rollout, amidst hopes it will pave the way to a speedy economic recovery later in 2021.
But somewhat dashing these hopes was Boris Johnson, who suggested that too early’ to begin discussing the easing of lockdown measures, despite the progress being made with vaccinations.
Three Things to Watch Out for This Week
1. UK Coronavirus Developments
For GBP investors the focus this week will be on the UK’s fight against the coronavirus. While the country’s vaccination programme continues to be ramped up, there are now concerns about potential vaccine shortages, which could derail the government’s plans to have the most vulnerable vaccinated by mid-February.
2. South African Coronavirus Headlines
Movement in the Rand is also likely to be driven by domestic coronavirus developments, which may see the currency face an uphill battle as the country continues to struggle against a highly infection strain.
3. US Stimulus News
Also influencing ZAR exchange rates this week will be any news regarding Biden’s stimulus efforts, with the Rand likely to face some headwinds amidst reports his package is facing some pushback from Congress.
Looking ahead, it seems likely that the GBP/ZAR exchange rate will face additional volatility this week as coronavirus developments continue to dictate movement in the pairing.