Growing Worries over South African Debt Shores up Pound South African Rand (GBP/ZAR) Exchange Rate
A general resurgence in global market anxiety and worries over South Africa’s debt levels pushed the Pound Sterling to South African Rand (GBP/ZAR) exchange rate higher today.
News that trials of a Covid-19 vaccine had been paused in response to the illness of a participant weighed heavily on market sentiment, leaving the South African Rand (ZAR) vulnerable.
This latest interruption in the process towards finding a vaccine reaffirmed fears that the current pandemic crisis is more likely to persist for months to come.
ZAR exchange rates faced further selling pressure on the back of comments from finance minister Tito Mboweni, who requested a delay of a week for the budget.
Coupled with suggestions that the government’s plans to curb rising debt levels are overambitious this pushed the Rand sharply lower across the board.
Signs of SA Construction Sector Improvement May Boost South African Rand
Even though August’s South African retail sales data bettered forecasts this failed to prevent the GBP/ZAR exchange rate gaining ground.
Although sales saw solid growth of 4% on the month wider worries over the outlook of the South African economy and its future remained.
Thursday’s building permits figure may help to put something of a floor under the South African Rand in the short term, however.
If the construction sector shows signs of recovery from its recent slump this may offer investors some cause for optimism over the economic outlook.
Nevertheless, the Rand looks set to remain vulnerable to any fresh deterioration in global market sentiment in the days ahead.
As long as anxiety over Covid-19 and the prospect of renewed lockdown conditions around the global persists this could keep the GBP/ZAR exchange rate on a positive bias.
Hopes of UK Avoiding Fresh Lockdown Limit Pound Downside
With UK politicians divided over the prospect of tighter Covid-19 restrictions the mood towards Pound Sterling (GBP) saw some improvement.
As Boris Johnson appeared keen to avoid another national lockdown a sense of relief helped to buoy the Pound against its rivals.
If the country can avoid returning to a full lockdown this may ease the risk of a renewed slowdown in economic momentum, which might erase all of the UK’s recent signs of recovery.
Unless investors see reason to bet that the economy could prove more resilient in the final months of the year, in spite of the Covid-19 crisis, GBP exchange rates may see limited traction.
The approaching deadline for UK-EU trade talks may equally cast a shadow over the Pound, with the risk of a no-deal scenario still having the potential to plunge the economy into fresh chaos.