Pound to South African Rand Exchange Rate Climbing on Lasting Rand Weakness
Despite a lack of demand for the Pound (GBP) today, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate is advancing. Investors are selling the Rand (ZAR) despite fresh South African stimulus news, as a domestic lockdown begins.
After opening this week at the level of 20.50, GBP/ZAR had been fluctuating in a fairly tight region for much of the week. This has been due to mixed demand for both currencies, as they attempt to benefit from US Dollar (USD) losses.
However, the Rand’s weakness is a little more pronounced today. This has made it easier for GBP/ZAR to make a solid advance.
At the time of writing on Thursday, GBP/ZAR is trending near a high of 20.97. This is the best level for the pair in a fortnight, since the 12th of March.
Pound (GBP) Exchange Rates Steadying as Investors Await UK Stimulus News
The Pound’s movement has been a little steadier this week. Investors are buying the British currency back from its cheapest levels, thanks in part to this week’s fresh US Dollar (USD) weakness.
However, Sterling’s appeal is limited overall. Investors are hesitant to buy the British currency too much, amid hopes that the Bank of England (BoE) and UK government will offer more stimulus to protect Britain’s economy from the coronavirus pandemic.
The BoE is not expected to announce any big surprises today which could leave Sterling limp. Still, investors are hopeful for upcoming UK fiscal policy news expected soon.
According to Yohay Elam, Analyst at FXStreet:
Chancellor of the Exchequer Rishi Sunak is readying more steps, focusing now on small businesses. The government has the backing of the central bank, which is ready to buy more bonds. The BoE convenes later in the day for its scheduled meeting.’
South African Rand (ZAR) Exchange Rates Jittery as South Africa Enters Lockdown
Markets were generally impressed by a fresh monetary stimulus package of quantitative easing (QE) announced by the South African Reserve Bank (SARB) this week.
However, the boost this gave to the South African Rand was short-lived. Instead, the Rand, which is often correlated to emerging market and risk-sentiment, remained pressured by concerns over the stability of South Africa’s economy.
South Africa is beginning lockdown today, which will last 21 days. Concerns over how the lockdown will impact South Africa’s economic outlook is keeping pressure on the Rand.
According to a note from Nedbank Economist Reezwana Sumad:
‘Today, the markets are likely to trade cautiously, although the Rand has some room for further improvement towards the 17.0000 handle in the short term,’
Pound to South African Rand (GBP/ZAR) Exchange Rate Could Climb Higher amid Lockdown
Both Britain and South Africa are in lockdown. However, markets speculate that Britain’s economy could weather the coronavirus pandemic a little better than South Africa’s.
As the Rand is a currency correlated to emerging market and risk sentiments, it may have further to fall as the coronavirus crisis continues. This would make it easier for GBP/ZAR to rise.
On the other hand though, if South Africa ramps up its stimulus plans or if UK stimulus disappoints, the pair could shed some of its recent gains.
For now, Pound investors will closely watch upcoming Bank of England (BoE) and Treasury news. Chancellor Rishi Sunak’s fresh fiscal stimulus could boost the Pound if it impresses investors.
South African Rand movement will depend on market sentiment and rival strength, as well as signs of how South Africa is handling lockdown. The Pound to South African Rand (GBP/ZAR) exchange rate outlook remains highly volatile.