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Two-Month-Best for Pound to South African Rand Exchange Rate but Outlook Limited

Pound to South African Rand Exchange Rate Slips Back from 2-Month-Highs 

Due to a combination of rival weakness and market risk-aversion, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has seen strong gains this week. The Pound (GBP) outlook remains filled with uncertainties though, so gains may be limited. 

After opening this week at the level of 21.32, GBP/ZAR briefly dipped lower before starting to trend higher. Since the middle of the week, GBP/ZAR has been solidly trending higher. 

This morning, GBP/ZAR touched on a high of 22.25. This was the best level for the pair since early May, over two months ago. 

While GBP/ZAR has been struggling to hold its best levels, GBP/ZAR is still holding most of this week’s impressive gains. At the time of writing, GBP/ZAR is trending near the level of 22.16. 

The pair could shed some of its gains in the coming week though depending on key UK data and Bank of England (BoE) news. 

Pound (GBP) Exchange Rates Struggle to Hold Best Levels amid Fresh Northern Lockdown 

For most of the past week, the Pound has been gaining due to weakness in other major currencies. In particular, the Pound has been gaining on concerns that the US coronavirus situation was even worse than expected. 

However, Britain’s outlook actually remains filled with uncertainties as well. This is limiting the Pound’s appeal and advance potential, making it harder for Sterling to hold its gains. 

Overnight, the UK government suddenly announced new lockdown measures for certain regions in northern England. The lockdowns come as coronavirus infections worsen in some parts of the north. 

The news saw mixed reaction, with some analysts welcoming action to tackle the virus but others expressing concern with the suddenness and lack of clear signalling on plans. 

South African Rand (ZAR) Exchange Rates Give Up on Advance Attempts Leading to Plunge 

The South African Rand (ZAR) had been benefitting from market risk-sentiment and coronavirus hopes in recent months. As a currency often correlated to risk and emerging market sentiment, the Rand has seen a lot of movement in reaction to coronavirus developments. 

This is perhaps why the Rand was throttled by this week’s shift to more significant panic over a ‘second wave’ of coronavirus infections. 

With cases surging in the US and rebounds of cases in some other major economies, the South African Rand has been losing its appeal. Concerns are rising that lockdowns could be extended and further damage economic activity. 

According to Andre Botha, Senior Dealer at TreasuryOne, this week’s poor US data also played a part in Rand losses: 

‘We’ve actually been calling for the Rand to start falling towards 17.00 in the past few days. It’s really overstretched, and now the elastics have snapped, 

The bad US data didn’t help.’ 

Pound to South African Rand (GBP/ZAR) Exchange Rate Outlook Could Worsen Again 

The Pound to South African Rand exchange rate saw strong gains over the past week, but the pair could still fall again if the Pound fails to hold its ground. 

Sterling’s outlook remains marred with UK coronavirus and Brexit uncertainties. Some better than expected UK data has not been enough to change the market’s gloomy sentiment on Britain’s handling of the pandemic. 

In fact, if next week’s UK data and Bank of England (BoE) news mounts concerns, Sterling could fall again. 

UK PMI results from July will be published earlier in the week. These will be the clearest data yet on how Britain’s economy performed over the past month. 

The Bank of England’s (BoE) August policy decision on Thursday could be the week’s biggest event though. If the bank shows any signs that it could take an even more dovish stance on UK monetary policy, the Pound’s potential for gains will be even further limited. 

South Africa’s July PMIs are also due next week, but shifts in global risk and emerging market sentiment may be more likely to influence the Pound to South African Rand (GBP/ZAR) exchange rate.