The Pound South African Rand (GBP/ZAR) exchange rate is struggling to recover from last week’s losses, with coronavirus concerns injecting volatility into the pair.
What’s Been Happening: GBP/ZAR Still Subdued after Last Week’s Spike
The South African Rand gained on the Pound at the start of last week, as a larger-than-expected trade surplus and rising commodities prices gave ZAR a boost.
The Rand then slumped against Sterling on Thursday, with the US non-farms payrolls figure looming and South Africa’s worsening covid crisis weighing on ZAR.
However, the Rand reversed these losses the following day, as a dip in the US Dollar and a greater appetite for risk boosted demand in the emerging market currency.
Meanwhile, fears of post-furlough unemployment and post-Brexit staff shortages weighed on the Pound at the beginning of last week.
A generally upbeat outlook on the UK economy allowed Sterling to capitalise on ZAR’s slump mid-week, but it was unable to hold onto these gains following dovish comments from the Bank of England (BoE) Governor Andrew Bailey, who reiterated the central bank’s ‘transitory’ inflation narrative.
The Pound South African Rand exchange rate has strengthened somewhat over the last two days, but the gains have been unstable. The UK’s reopening optimism is beset by concerns that if the UK doesn’t proceed cautiously, it could threaten the progress the country has made against the virus.
Three Things to Watch Out for This Week
- South Africa Coronavirus News
A third wave of coronavirus continues to spread through South Africa, threatening to overwhelm the health services. Any positive news about vaccinations could bolster the Rand, while negative developments will likely dent it.
- Commodities Prices
As the global recovery gathers pace, commodities prices are rising. If commodities prices stay strong, ZAR could benefit as South Africa would profit from its mining exports.
- UK GDP
The UK’s GDP three-month average is expected to jump to 3.9% on Friday, fuelled by the UK’s economic recovery, which could give the Pound South African Rand exchange rate a boost.
With the coronavirus crisis in South Africa unlikely to improve overnight, GBP/ZAR could climb over the coming week. Risk appetite will likely drive some movement in the pair; so too will commodities prices, which could buoy ZAR and cap GBP’s gains. However, the UK’s GDP figures on Friday may be enough to see Sterling strengthen.