Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Muted on Coronavirus Drug Trial
UPDATE: The Pound Sterling South African Rand (GBP/ZAR) exchange rate remained muted on Monday afternoon. This left the pairing trading at around R22.4366.
Risk appetite was buoyed today as encouraging data from a potential coronavirus vaccine caused an upswing in optimism.
Drugmaker Moderna Inc noted its experimental coronavirus vaccine showed promising results in a small early stage trial.
According to Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey:
‘If there really is a workable vaccine that can be mass produced, it really is a game changer for so many industries about which we weren’t so sure if the reopenings would solve their problems.’
Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Muted as Gold Jumps to Seven-Year High
The Pound Sterling South African Rand (GBP/ZAR) exchange rate remained muted on Monday. This left the pairing trading at around R22.4104.
The South African Rand was able to make gains against a handful of currencies on Monday as demand for riskier assets increased.
According to Adam Cole, chief currency strategist at RBC Capital Markets:
‘Markets are quietly risk-on overnight.’
Risk appetite jumped as further countries around the world began to ease lockdown regulations and an increase in gold prices buoyed commodity-linked currencies.
Gold rose by 1% to its highest level in more than seven years, reflecting fears of a deep recession in the United States.
Countries across the globe have continued to lift coronavirus restrictions, including epicentres New York and Italy. Added to this, data has shown infection rates have declined which further boosted risk sentiment.
However, US-China trade tensions have begun to flare up once again. In the latest move, Washington have moved to block microchip supplies to China’s Huawei Technologies.
Commenting on this, senior dealer at TreasuryONE, Andre Botha said:
‘The Sino-US tensions and poor economic data are being offset by optimism over vaccine trials and declining global coronavirus cases as well as the restarting of global economies.’
Brexit Stalemate and Negative Rates Weigh on Sterling (GBP)
The Pound remained under pressure today, edging towards a two-month low against its main rivals on talk of negative interest rates.
In an interview with the Telegraph, the Bank of England’s (BoE) chief economist, Andy Haldane did not rule out the bank leaning towards negative interest rates.
In his interview with the newspaper, Mr Haldane refused to rule out the possibility of taking interest rates into negative territory.
This followed earlier comments from the bank’s Governor, Andrew Bailey, who said the BoE was not contemplating negative rates, although did not rule this out altogether.
Added to this, GBP also remained under pressure due to a stalemate in Brexit negotiations with the EU.
This raised the prospect that Britain will be unable to strike a deal on the country’s formal departure from the EU at the end of the year.
Commenting on this, FX and global macro strategist at Arkera, Viraj Patel stated:
‘We’ve seen sentiment around Sterling flip from positive to negative in recent weeks as investors shift focus to local idiosyncratic risks.
‘Talk of negative rates in the UK (with markets slowly pricing in this reality) – as well as the renewed threat of a ‘No Deal’ Brexit once the transition period ends this year – are materially weighing on the Pound.’
Pound Rand Outlook: UK Employment Data in Focus
Looking ahead to Tuesday, the Pound (GBP) could slide against the South African Rand (ZAR) following the release of UK employment statistics.
If data shows the country’s unemployment rate jumps in March, and the number of people claiming unemployment benefits in April has increased more than forecast, GBP will suffer losses.
Meanwhile, the Rand could give up any gains following the release of February’s manufacturing production data.
If production plummets further than expected before the coronavirus crisis hit the country, the Pound South African Rand (GBP/ZAR) exchange rate will be left flat.