Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Slumps on Wuhan Virus Fears
The Pound Sterling South African Rand (GBP/ZAR) exchange rate rallied on Monday morning, leaving the pairing trading at R19.0242.
The South African Rand slumped as investors weighed up the impact of China’s coronavirus outbreak as the death toll rose to 81.
Commenting on this, OANDA’s Asia Pacific senior market analyst, Jeffrey Halley noted:
‘The Wuhan virus will of course hang like a shadow over financial markets this week.
‘With asset markets pumped up on hopes of a global post-trade deal recovery and cheap central bank money, an unexpected growth shock could leave them particularly vulnerable to a potentially strong downward correction.’
Added to this, a sluggish outlook for the economy left the Rand on the back foot as this week’s session began.
Earlier this month both the International Monetary Fund (IMF) and the South African Reserve Bank (SARB) downgraded growth predictions.
In a morning note, NKC African Economics revealed:
‘The domestic situation will increasingly come to the fore as the February budget nears, with most analysts attempting to ascertain how Moody’s will receive the budget, with Moody’s set to make a call on the country’s final investment-grade rating in March.’
This left the South African Rand on track for its worst day in over two weeks.
Sterling (GBP) Rises as BoE Meeting in Focus
The Pound was able to rise against the risk-sensitive Rand despite the pressure from the upcoming Bank of England (BoE) meeting.
The bank is currently closer than any time in the last three years to slashing interest rates on Thursday.
While Friday saw the release of strong PMI data showing the private sector in the UK returned to growth, a rate cut still seems likely.
Markets have predicted the chance of a rate cut is around 55%, down from a 70% chance a week ago.
However, Sterling was able to make gains against the Rand thanks to a sluggish economic outlook and the continuing threat of the Wuhan coronavirus.
Pound South African Rand Outlook: Will the Wuhan Virus Continue to Weigh on Risk-Appetite?
Looking ahead, the Bank of England (BoE) monetary policy meeting is likely to be the main focus for markets over the course of the week.
If the bank continues to appear close to cutting rates, the Pound (GBP) could suffer some losses against the South African Rand (ZAR).
However, Sterling could make further gains against the Rand if investors continue to fear the spread of the Wuhan coronavirus.
If concerns over the spread of the virus increases, and risk appetite continues to wane, the Pound South African Rand (GBP/ZAR) exchange rate will edge higher.