GBP/ZAR Exchange Rate Falls as Covid-19 Vaccine Hopes Buoy Risky Assets
The Pound to South African Rand (GBP/ZAR) exchange rate dipped by -0.2% today, with the pairing currently trading round R20.953.
The risk-averse South African Rand (ZAR) edged higher today on growing hopes for a Covid-19 vaccine. This follows reports from pharmaceutical company AstraZeneca and Oxford University of vaccine trials showing strong immune responses as well as being safe-for-use.
Stephen Innes, an analyst AxiCorp, commented:
‘Risk assets are moving to the vaccine pump’s beat after it was raining positive vaccine trials overnight, and investors are still dancing in that rain.’
‘The worsening outlook on the virus front continues to churn in the background. But the fear of the virus is less than it was, so the economic beat down is expected to be less this time around.’
As a result, risk sentiment has improved today, benefiting risky assets like the South African Rand (ZAR), which is particularly vulnerable to concerns over the global economy and coronavirus pandemic.
Pound (GBP) Sinks Despite the BoE’s Reassurances of a V-Shaped Economic Recovery
The Pound (GBP) fell today after the UK’s public borrowing figure set a record owing to the coronavirus pandemic. Chancellor Rishi Sunak also warned of some ‘tough choices’ that will be made in response to the coronavirus pandemic.
Jeremy Thomson-Cook, the chief economist at financial services firm Equals, was more downbeat, saying:
‘The UK economy continues to burn, and the government’s spending taps need to remain open for the foreseeable future in order to give businesses and consumers every opportunity to support each other as we gradually return to normality.’
Meanwhile, the Bank of England’s (BoE) Chief Economist, Andy Haldane, has continued to insist that the UK economy is seeing a V-shaped recovery from the Covid-19 crisis.
Mr Haldane said:
‘Roughly half of the roughly 25% fall in activity during March and April has been clawed back over the period since. We have seen a bounce-back. So far, it has been a V. That, of course, doesn’t tell us about where we might go next.’
With mixed messages about the UK’s economic recovery, Sterling traders are remaining cautious today as uncertainty remains over the UK’s future relationship with the European Union. As a result, UK-EU Brexit negotiations are back in focus as worries grow over post-Brexit Britain.
GBP/ZAR Outlook: Could Fears for Britain’s Economic Recovery Drag Down Sterling?
South African Rand (ZAR) investors will be awaiting tomorrow’s release of South Africa’s Retail Sales report for April. Any improvement in the nation’s retail sector could further buoy the Rand.
ZAR will also remain sensitive to risk-sentiment this week. If hopes for a Covid-19 vaccine continue to grow, then we could see the ZAR/GBP exchange rate head higher.
The Pound (GBP) could suffer this week if uncertainties grow over the post-Brexit relations with the EU. Furthermore, any indications that the UK could not be facing a V-shaped economic recovery would also prove GBP-negative.