Pound to South African Rand Exchange Rate Holds Ground on Bank of England News
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate outlook has risen today. As global risk-sentiment continues to weaken, the Pound (GBP) received an unexpected boost from the latest Bank of England (BoE) news.
Since opening this week at the level of 21.41, GBP/ZAR has been trending with an upside bias.
While GBP/ZAR has been unable to hold its best levels, it continues to trend higher at the time of writing on Thursday. GBP/ZAR is currently trending above the level of 21.67.
Investors bought the Pound in reaction to the day’s BoE decision. Meanwhile, the South African Rand (ZAR) outlook is weakening as risk-sentiment fades.
Pound (GBP) Exchange Rates Jump on Unexpected Bank of England (BoE) Split
The Bank of England (BoE) announced today that it would expand its quantitative easing (QE) scheme. The scheme to help Britain weather the coronavirus pandemic has been expanded to £745b today.
While this expansion was expected though, the decision was not unanimous.
Andy Haldane, the bank’s Chief Economist, surprised markets by voting against the expansion. As a result, investors perceived the bank as less dovish than expected.
According to the bank’s statement today:
‘There are signs of consumer spending and services output picking up, following the easing of Covid-related restrictions on economic activity. Recent additional announcements of easier monetary and fiscal policy will help to support the recovery.’
As a result, the Pound saw a jump in demand following the decision.
South African Rand (ZAR) Exchange Rates Limp amid Market Risk-Aversion
The South African Rand (ZAR) is a currency often correlated to market risk-sentiment.
It is often weak in times of global market uncertainty, as investors avoid assets correlated to risk and emerging markets.
This is why the currency has been fairly unappealing this week. Rising fears of a ‘second wave’ of coronavirus infections have caused risk-sentiment to weaken.
Escalating military tensions between India and China have also hit risk-sentiment.
Amid a lack of notable South African data in recent sessions, the currency’s outlook has been driven largely by risk-sentiment.
Pound to South African Rand (GBP/ZAR) Exchange Rate Gains May Be Limited
The Pound to South African Rand (GBP/ZAR) exchange rate is trending higher this week. However, the pair’s potential for further gains may be limited.
The Pound is gaining on the Bank of England’s (BoE) decision today, which was perceived as more hawkish than expected.
However, analysts warn that there is reason to believe the BoE will continue to be cautious over the coming months.
The Resolution Foundation believes the bank has even tougher decisions ahead:
The South African Rand could keep weakening though, depending on shifts in risk-sentiment.
If coronavirus fears continue to worsen and risk-sentiment keeps weakening, the Pound to South African Rand (GBP/ZAR) exchange rate has a better chance of advancing further.
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