The Pound South African Rand (GBP/ZAR) exchange rate is holding near a four-month high after Sterling recovered from the shock of the UK’s lockdown lifting last week.
The Rand, meanwhile, remains under pressure amid the aftermath of South Africa’s recent unrest.
What’s Been Happening: GBP/ZAR Recovers from Covid Slump
The Rand is still reeling following eight days of violent unrest earlier this month, which led to more than 330 deaths and thousands of arrests.
Looting and rioting erupted in South Africa’s two most populous provinces following the jailing of former president and anti-apartheid fighter Jacob Zuma. Zuma’s supporters clashed with fellow citizens and police in the worst violence in South Africa since 1994.
The army brought the rioting under control on Saturday 17 July, but by then considerable damage had been done. US bank JP Morgan estimates that the unrest will cause the South African economy to contract by 3% in the coming quarter.
As a result, the Rand was fairly rangebound against a weaker Pound and slumped as Sterling gained strength.
Meanwhile, GBP was pressured by surging UK Covid cases after the government lifted most lockdown restrictions last week.
As the week went on, Covid cases began to fall and a number of positive economic data releases helped to boost Sterling, with the Pound South African Rand exchange rate hitting a four-month high.
Three Things to Watch Out for This Week
- UK Consumer Credit
Consumer credit is predicted to have more than doubled in June. Such a result would indicate high UK consumer confidence and increased spending, which could boost the Pound.
- UK Covid Cases
Cases of coronavirus in the UK have been falling for the last six days. However, the 19 July unlocking will not yet be represented in the data. Will another rise in cases dent Sterling?
- South Africa Balance of Trade
The Rand could find some much-needed support on Friday, as South Africa’s trade surplus is expected to widen by ZAR8.4bn thanks to increased demand and rising commodities prices.
GBP/ZAR Forecast
It may take a while for the South African Rand to recover, considering the long-lasting social and economic damage caused by the recent unrest.
That said, all eyes will be on the UK’s Covid figures. If cases start to rise again, GBP/ZAR could stumble.