GBP/ZAR Exhange Rate Trending Higher but Risk-Sentiment Causing Mixed Movement
Despite a lack of domestic support for either the Pound (GBP) or South African Rand (ZAR), the Pound to South African Rand (GBP/ZAR) exchange rate is fluctuating today. Both currencies are benefitting from global risk-sentiment.
Since opening this week at the interbank level of 20.17, GBP/ZAR has been trending higher as the Pound benefits more from the market’s mood. Yesterday, GBP/ZAR touched on a high of 20.91, the best level for the pair in around two weeks.
Movement has been narrower and more volatile this week overall though, amid mixed movement in both currencies. At the time of writing, GBP/ZAR is trending in the interbank region of 20.79.
Pound (GBP) Exchange Rates Benefitting from Vaccine Hopes
The Pound is climbing against many major currencies this week. This is despite a lack of solid fresh domestic support for the British currency or the UK outlook.
As the UK government’s vaccine scheme is running ahead of other major economies, market optimism around vaccine rollout is benefitting the Pound a particularly large amount.
Recent UK data has been disappointing, and domestic coronavirus infection rates remain high. These factors are limiting the Pound’s appeal, but the British currency is still benefitting from the overall market mood.
According to Jeremy Stretch, Head of G10 FX Strategy at CIBC Capital Markets:
‘For now Sterling continues to trade more on hope, vaccines, than current reality,’
South African Rand (ZAR) Exchange Rates Also Higher on Risk-Sentiment
The South African Rand is a currency that also often correlates to market risk-sentiment. As a result, rising global coronavirus vaccination hopes have been boosting the Rand this week too.
However, the Pound has ultimately been benefiting more, as the UK vaccine outlook is comparatively optimistic.
South Africa has yet to receive any vaccine doses, despite its high coronavirus infection rates. This is weighing on the Rand’s overall appeal.
Today’s South African business cycle indicator data fell short of expectations, but had no notable impact on the Rand’s movement.
Pound to South African Rand (GBP/ZAR) Exchange Rate Could be Driven by Fed News
Both the Pound and South African Rand are benefitting from risk-on movement today. As a result, developments in risk-sentiment could continue to influence GBP/ZAR movement.
This evening’s American session will see the Federal Reserve hold its January policy decision, It will be the first Fed decision of the year, and the first of the new Joe Biden presidency.
No notable shift in tone is expected from the Fed. In fact, the bank is expected to maintain its dovish stance and even indicate that there may not be any tightening for quite some time.
The Pound is likely to benefit more from any risk-on movement, due to Britain’s comparatively more optimistic coronavirus vaccine outlook.
This means that GBP/ZAR could be in for more gains. The Rand is only likely to see a more sustained rise in demand if South Africa’s own coronavirus situation improves.
Pound to South African Rand (GBP/ZAR) exchange rate investors may also react to upcoming South African trade and business confidence stats on Friday.