Pound to South African Rand (GBP/ZAR) Exchange Rate Rises as South Africa Requests Loan from IMF

June 8, 2020 - Written by John Cameron

STORY LINK Pound to South African Rand (GBP/ZAR) Exchange Rate Rises as South Africa Requests Loan from IMF

GBP/ZAR Exchange Rate Edges Higher as South Africa Economy Struggles

The Pound to South African Rand (GBP/ZAR) exchange rate edged higher today, with the pairing currently trading around R21.36.

The South African Rand (ZAR) has remained subdued today as South Africa’s economic recovery from the coronavirus looks to be much slower than previously expected. This follows news that South Africa has requested a loan from the International Monetary Fund (IMF).

Lumkile Mondi, economics lecturer at Johannesburg’s University of the Witwatersrand, commented:

‘This is a precursor because Cyril’s government doesn’t have the resources. This is just to soften the alliance partners in preparation for a much bigger ask.’

However, some ZAR traders are hopeful that the nation can begin to overlook coronavirus factors and begin to focus on the nation’s economic improvement.

After nearly a decade of difficulties under the previous SA President, Jacob Zuma, as well as the coronavirus outbreak – and South Africa’s loss of investment-grade rating – have let the South African economy severely compromised.

Pound (GBP) Rises as UK Has Lowest Covid-19 Daily Death Toll Since Late March

The Pound (GBP) benefited from reports that Britain had experienced the lowest daily coronavirus-related deaths since 22nd March. As a result, Sterling traders are becoming more optimistic that the UK can begin to commit to a quicker-than-previously-expected economic recovery.

Meanwhile, Downing Street is expected to announce further easing of the UK’s nationwide Covid-19 lockdown. The GBP/ZAR exchange rate could edge higher as investor become more hopeful as the UK economy slowly reopens.

In UK economic data, later this evening will see the release of the BRC retail sales report for May. However, any signs that the UK’s retail sales sector is lagging would prove Pound-negative.

Post-Brexit fears are, however, holding back some of Sterling’s gains today. UK-EU negotiations are set to continue this week, and with investors becoming pessimistic over the possibility of a no-deal on 31st December, we could see the GBP/ZAR exchange rate begin to dip.

GBP/ZAR Outlook: Could Easing UK Lockdown Restrictions Boost Sterling?

Pound (GBP) traders will be awaiting tomorrow’s speech by Sir Jon Cunliffe, the Deputy Governor for Financial Stability of the Bank of England (BoE). Any dovish comments about the British economy, however, would prove GBP-negative.

South African Rand (ZAR) investors will be looking ahead to Thursday’s release of the SA manufacturing production index for April. Any marked improvement in South Africa’s economy would prove beneficial for ZAR.

However, the ZAR/GBP exchange rate will continue to be driven by risk sentiment this week. As a result, we could see the South African Rand (ZAR) edge higher as the global economy continues to reopen.

The GBP/ZAR exchange rate could extend its gains this week if Downing Street continues to ease its lockdown restrictions.

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TAGS: Pound Rand Forecasts South African Rand Forecasts