The Pound to South African Rand (GBP/ZAR) exchange rate tumbled last week, as the Rand was boosted by the easing of domestic lockdown measures.
What’s Been Happening: Rand Bolstered by Economic Optimism
The Rand shot higher last week, with the emerging market currency receiving a shot in the arm amidst signs that South Africa’s economic prospects are improving.
This was mostly driven by President Cyril Ramaphosa’s decision to begin easing lockdown restrictions, stoking hopes that the reopening of some parts of the economy will help to spur growth.
Further buoying this optimism was the news that the first coronavirus vaccines had begun to arrive in the country, as well as reports that South Africa’s fiscal deficit may be smaller than expected, following a surge in tax revenues.
Meanwhile, the Pound struggled to put up a fight against the Rand last week in spite of the UK’s continued success with its vaccination programme.
However, the GBP/ZAR did see some fleeting gains in the latter half of the week, after the Bank of England (BoE) signalled that negative interest rates are unlikely to be on the table during the currency cycle of easing.
Three Things to Watch Out for This Week
- Coronavirus Developments
Continuing to act as a key catalyst in the GBP/ZAR exchange rate will be coronavirus headlines, with the news that the South African strain is resistant against the Oxford vaccine potentially injecting some volatility into the pairing
- UK GDP
The spotlight for GBP investors this week will undoubtedly be on the UK’s latest GDP figures. Economists are forecasting a modest expansion of growth in the fourth quarter, which if correct could see the Pound accelerate.
- Ramaphosa’s SONA
In focus for ZAR investors meanwhile will be President Cyril Ramaphosa’s State of the Nation Address as they look for any policy plans which could help put South Africa on the road to economic recovery.
Looking ahead, the GBP/ZAR exchange rate may be met by some volatility this week, as coronavirus developments remain a key focus for markets.