Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Muted as Rand Breaks Six-Day Winning Streak
The Pound Sterling South African Rand (GBP/ZAR) exchange rate remained flat on Tuesday afternoon. This left the pairing trading at around R21.2146.
The South African Rand was left flat on Tuesday as the focus shifted to the upcoming US Federal Reserve meeting.
Traders are looking for any new stimulus from the Fed to help a quick economic recovery following the coronavirus lockdowns.
ZAR struggled to make gains today ahead of Wednesday’s Fed meeting.
This upcoming meeting is likely to be decisive for markets as traders will be looking for signs that policymakers are still sounding cautious and are likely to introduce further stimulus. Or, whether the bank is likely to reinforce an upbeat tone after the release of last week’s better-than-expected US jobs data.
Commenting on this, Maybank forex research wrote in a note:
‘Any slippage on Fed to address the rising U.S. Treasury yield could hurt risk assets – equities and precious metals could face renewed downward pressures.’
The US Dollar (USD) was able to make gains today, which broke the Rand’s six-day winning streak and left it under pressure against GBP.
Brexit Worries Continue to Cap Sterling (GBP) Gains
The Pound remained under pressure on Tuesday, erasing earlier gains during Monday’s session as global risk appetite declined.
Domestically, concerns over Brexit and the economy reopening caused movement of the currency.
Weaker demand for the safe-haven US Dollar (USD) buoyed both the Pound and Rand. The British currency was able to hit a new three-month high against USD overnight.
However, GBP’s eight-day winning streak was likely to be cut short as Dollar demand increased.
According to Ulrich Leuchtmann, head of FX and commodity research at Commerzbank:
‘Sterling is highly sensitive to these changes in risk sentiment – it’s a more risky currency than it was a couple of months ago and some years ago.’
Markets are currently waiting further information on the re-opening of the British economy.
Brexit continues to remain the main cause for concern after the last round of trade talks between the UK and EU failed to make progress. The UK now has until the end of the month to request an extension to the Brexit transition period which is due to end in December.
Pound South African Rand Outlook: Fed Meeting in Focus
Looking ahead to Wednesday, the South African Rand (ZAR) could edge higher against the Pound (GBP) following confidence data.
If SACCI’s business confidence rises higher than expected in May it will offer the Rand a boost.
Meanwhile, Rand traders will be eyeing the US Federal Reserve monetary policy meeting tomorrow.
If Fed policymakers are overly optimistic that the world’s largest economy is going to rebound quickly from the coronavirus crisis, the Pound South African Rand (GBP/ZAR) exchange rate will rise.
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