Pound South African Rand Exchange Rate Plummets: ZAR Boosted by Risk-On Markets

GBP/ZAR Exchange Rate Falls as Improving Risk Sentiment Drives Demand for Risky Assets

The Pound South African Rand exchange rate plummeted by over -1% today as increased risk appetite has buoyed demand for the risk-sensitive ZAR. The pairing is currently fluctuating around R19.62.

The South African Rand (ZAR) also benefited from yesterday’s stronger-than-expected South African retail sales report for February.

The figure beat forecasts and rose by 2.3% in the second month of 2020, buoying confidence in the nation’s retail sector.

Analysts at Reuters commented on the data:

‘South Africa’s retail sales rose for the first time in eleven months in February, data showed on Wednesday, defying forecasts of another downturn as purchases of furniture, household appliances and food jumped.

‘Retail sales rose 2.3% year on year in February following a revised 3.7% contraction in January. On a monthly basis sales were up 6.9%, but were down 0.9% and in the three months since December.’

A rally in US stocks has also helped to buoy demand for risk-correlated currencies like the South African Rand.

Pound (GBP) Exchange Rate Falls Despite Improving UK Market Confidence

The Pound (GBP) fell against the South African Rand (ZAR) today due to a lack of any notable UK economic data releases.

Instead, UK markets are monitoring the nation’s Covid-19 situation, which is showing steady signs of improving, with daily cases down against last week and hospitalisations continuing to fall.

As a result, we could see the GBP/ZAR exchange rate begin to claw back some of its losses if confidence in the nation’s economy continues to grow.

In UK economic news, however, restaurant reservations have soared since England’s easing of lockdown measures for non-essential shops, bars and restaurants.

The Office for National Statistics (ONS) commented on the report:

‘On Monday 12 April 2021, estimates for UK seated diner reservations were at 79% of the level seen on the equivalent Monday of 2019, the first time their level has exceeded 2% since before the announcement of the latest lockdown in England on 4 January 2021.

‘This coincides with the easing of lockdown restrictions in England on this day, allowing restaurants to open for outdoor dining. The equivalent figures for London and Manchester were 47% and 153%, respectively.’

However, today’s confidence in the UK’s steady economic recovery have failed to benefit the Pound South African exchange rate.

Pound South African Rand Exchange Rate Forecast: Could Improving Risk Sentiment Boost ZAR?

Pound (GBP) investors will be awaiting tomorrow’s speech from the Bank of England’s (BoE) Deputy Governor of Financial Stability Sir Jon Cunliffe.

Any further bullishness about the outlook for the British economy from the BoE would be GBP-positive.

The Pound South African Rand (GBP/ZAR) could continue to struggle, however, if risk sentiment improves and drives up demand for the South African currency.