Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Falls on Optimism Over Quick Global Recovery
The Pound Sterling South African Rand (GBP/ZAR) exchange rate slumped by around -0.3%, leaving the pairing trading at around R20.9310.
The South African Rand firmed during early trading today ahead of the latest inflation data and buoyed hopes for an economic recovery.
The Euro (EUR) was able to jump to a four-month high against the US Dollar (USD) on hopes the European Union would agree on a stimulus package to help the economy after the coronavirus pandemic.
This supported the Rand, and renewed hopes for a swifter global economic recovery drove riskier assets higher.
Hopes for finding a coronavirus vaccine also drove risk appetite higher and added to the positive market mood. This pushed ZAR higher against the Pound.
US researchers reported on Tuesday that Moderna Inc’s experimental vaccine showed it was safe. It also triggered immune responses to the coronavirus in all 45 volunteers in an early-stage study.
However, Rand gains against the Pound were limited after May’s inflation data rose by an annual 2.1%. South Africa’s monthly inflation plummeted by -0.6% which limited ZAR gains despite the upswing in risk appetite.
Sterling (GBP) Slumps as BoE’s Tenreyro Warns of Wary Consumers
The Pound was left flat today despite data revealing inflation rose unexpectedly last month. This was largely caused by rising prices for in-demand computer consoles during the coronavirus lockdown.
Consumer prices rose by 0.6% in June after a 0.5% increase in May, although the majority of economists expected inflation to fall.
In a statement, Britain’s Office for National Statistics (ONS) noted:
‘It is possible that prices have been influenced by the coronavirus (COVID-19) lockdown changing the timing of demand and the availability of some items, particularly consoles.
‘However, it is equally likely to be a result of the computer games in the bestseller charts.’
Meanwhile, Sterling struggled to make gains after the Bank of England’s (BoE) Silvana Tenreyro noted the economic recovery would likely be hindered by wary consumers.
Speaking earlier today, the BoE policymaker noted:
‘Behavioural responses mean that the UK economic outlook will continue to depend on the global and domestic spread of COVID-19.
‘Assuming prevalence gradually falls, my central case forecast is for GDP to follow an interrupted or incomplete ‘V-shaped’ trajectory, with the first quarterly step-up in Q3.’
Pound Rand Outlook: UK Unemployment Data in Focus
Thursday could see the Pound (GBP) suffer losses against the South African Rand (ZAR) following the latest UK employment statistics.
If the country’s unemployment rate jumps higher than forecast in May while June’s claimant count change surges, it will send Sterling lower.
Meanwhile, the Rand could struggle to make significant gains following the release of the latest inflation and buildings permits data.
If producer prices plummet in May while building permits data from March, April and May tumble, the Rand will suffer. This could leave the Pound South African Rand (GBP/ZAR) exchange rate flat.
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