GBP/ZAR Exchange Rate Falls as BoE Paints Dovish Outlook for British Economy
The Pound to South African Rand (GBP/ZAR) exchange rate fell by -0.3% today, with the pairing currently trading around R21.028.
The Pound (GBP) fell against many of its peers today after the Bank of England (BoE) held its interest rates at 0.1%, but sparked concern over the economy. The Bank said that the British economic outlook remains ‘unusually uncertain’ because of Brexit and the coronavirus pandemic.
Nevertheless, the Bank did state that UK economic data had been stronger-than-expected.
The BoE said:
‘Recent domestic economic data have been a little stronger than the Committee expected at the time of the August Report, although, given the risks, it is unclear how informative they are about how the economy will perform further out.’
‘The recent increases in Covid-19 cases in some parts of the world, including the United Kingdom, have the potential to weigh further on economic activity, albeit probably on a lesser scale than seen earlier in the year.’
Today also saw the US Democratic Presidential candidate, Joe Biden, warn that the controversial Brexit Internal Market Bill could jeopardise a UK-US trade deal in the future.
Consequently, this has sparked further uncertainty for the British economy and weighed on confidence in the Pound.
South African Rand (ZAR) Edges Higher as the SARB Holds Interest Rates at 3.5%
The South African Rand (ZAR) edged higher today after the South African Reserve Bank (SARB) held its interest rate at 3.5%.
Today also saw reports that South Africa had eased its strict lockdown as the number of Covid-19 cases has dropped.
As a result, this has provided a boost in confidence for the South African economy, which was suffering under the robust lockdown restrictions.
The ZAR has also benefited this week from signs that China’s economy could be on the road for recovery. As a result, investors have become more hopeful that South Africa’s economy could improve, seeing as China is the nation’s largest trading partner.
Furthermore, hopes of a breakthrough in Coivd-19 vaccine trials has also boosted the risk-averse South African Rand.
GBP/ZAR Forecast: Could Rising Covid-19 Cases Worldwide Drag Down the Risk-Averse South African Rand?
Pound (GBP) investors will be looking ahead to tomorrow’s release of August’s UK Retail Sales report. Any improvement would prove GBP-positive.
However, if Britain’s retail sales suffer from the Covid-19 pandemic and social-distancing restrictions, then we would see Sterling sink.
South African Rand (ZAR) investors will be closely monitoring global economic developments. If Covid-19 cases continue to rise worldwide, then the risk-sensitive ZAR would begin to struggle.
Brexit will continue to drive the GBP/ZAR exchange rate this week. If UK-EU – or UK-US – relations continue to sour over the controversial Brexit Internal Market Bill, then the pairing sill continue to fall.