Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Rises as UK Government Extends Lockdown
The Pound Sterling South African Rand (GBP/ZAR) exchange rate rose by around 0.5% on Friday morning. This left the pairing trading at around R23.4030.
Risk appetite boosted the Pound this morning, on reports of a successful coronavirus drug trial and plans to open up the United States economy.
Hopes for a successful coronavirus treatment was unable to boost the Rand which was left under pressure after a surprise interest rate cut.
Optimism about a Covid-19 treatment offset weak economic data from China, which showed the economy contracted for the first time since records began almost 30 years ago.
Commenting on this, Moh Siong Sim, currency analyst at the Bank of Singapore noted:
‘It’s this divided feeling between wanting to worry about the economic freeze and the hope that things might be re-starting quite soon.
‘We’re stuck in that limbo zone, but it does seem that the infection rate may have hit a peak at a global level […] and if we find a cure, then there’s a cure for the economy as well.’
Added to this, the British government announced it would extend the current lockdown for at least three more weeks.
This offered Sterling further support, allowing it to rise against the Rand.
South African Rand (ZAR) Falls despite Trump’s Announcement
Meanwhile, risk appetite was further boosted by US President Donald Trump’s announcement about plans to re-open the US economy.
On Thursday, President Trump outlined guidelines that would allow US states to emerge from the current lockdowns in a staggered approach.
The process would be subject to dependent on strict virus testing and individual state discretion.
Speaking to reporters on Thursday, the US President said:
‘We are not opening all at once, but one careful step at a time.’
However, while this boosted risk appetite and supported the Rand, traders were still wary after yesterday’s US employment data showed over 20 million Americans had lost their jobs.
Locally, anticipation of a government announcement about deeper fiscal stimulus to help limit damage.
Despite this, traders remained optimistic during Friday’s session and according to Investec analysts:
‘The Rand is already trading in deeply oversold territory and selling the up-ticks will still be favoured if one believes that the dollar is also due an extended slide.’
Pound South African Rand Outlook: Coronavirus and Risk Appetite in Focus
Looking ahead, the coronavirus pandemic is likely to continue to be the main driver of the Pound South African Rand (GBP/ZAR) exchange rate.
Risk appetite could continue to improve next week as further information is released about the coronavirus drug trial.
If Rand traders shrug off earlier worries following the shock interest rate cut, the South African currency could edge higher against the Pound next week.