Pound to South African Rand Rises on UK Covid-19 Vaccine Optimism
The Pound to South African Rand exchange rate rose by 0.5% today as the UK’s Covid-19 vaccine optimism continues to buoy Sterling. The pairing is currently fluctuating around R20.49.
Today also saw the UK’s Consumer Price Index for January rise unexpectedly by 0.7%, largely fuelled by furniture and food sales.
However, economics at the accountancy firm PwC warned:
‘Consumers will likely see an increase in the price of things like petrol, utilities and services this year, as global demand for oil picks up and demand recovers for the service sectors most impacted by restrictions, along with the VAT cut for hospitality coming to an end in April.
‘On the other hand, rising unemployment – expected with the end of the furlough scheme in April – will increase spare capacity in the labour market and subdue wage growth, putting downward pressure on prices.’
Today also saw the publication of the latest UK House Prices, which rose at their fastest rate in six-years.
As a result, GBP investors are becoming more confident about the outlook for Britain’s economy, with the rapid coronavirus rollout promising an early recovery.
South African Rand Falls as South African Retail Sales Suffer in December
The South African Rand suffered today following the publication of December’s South African Retail Sales Data, which fell by -1.3%.
Analysts at Reuters said:
‘South African retail sales fell 1.3% year on year in December following a revised 4.3% contraction in November.
‘On a month-on-month basis sales were down 0.8%, and in the three months to the end of December sales contracted 2.6% compared with the same period last year, the statistics agency.’
However, South Africa’s mutant strain of Covid-19 continues to pile on the problems for the nation’s economy.
As the new variant presents a threat to vaccinations, ZAR traders are becoming increasingly concerned that this could severely delay the nation’s economic recovery going forward.
Could US Stimulus Hopes Boost Demand for Risky Assets?
Pound traders will be looking ahead to tomorrow’s speech from Michael Saunders, a member of the Monetary Policy Committee for the Bank of England (BoE).
Any dovishness in his outlook for the UK economy, however, would be GBP-negative.
GBP investors will also continue to monitor the UK’s Covid-19 situation. Any signs of daily cases dropping and vaccinations rising, therefore, would boost the GBP/ZAR exchange rate.
The GBP/ZAR exchange rate will likely head higher this week as the outlook for South Africa’s economy continues to darken.
However, if the US makes progress towards rolling out its substantial stimulus package, we could see demand for the risk-sensitive ZAR pick-up.
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