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Pound South African Rand (GBP/ZAR) Exchange Rate Plummets Over 1% as US-China Tensions Resurface

May 4, 2020 - Written by John Cameron

Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Plummets as The US Blames China for Coronavirus Pandemic



The Pound Sterling South African Rand (GBP/ZAR) exchange rate slumped by over -1%, leaving the pairing trading at around R23.2122.

The Pound plummeted against the South African Rand today, as risk appetite amongst investors slumped after the US government made new attempts to blame China for the coronavirus pandemic.

On Sunday, US Secretary of State, Mike Pompeo said there was evidence the coronavirus was created in a lab in Wuhan. This increased tensions and dampened risk appetite and the increased market optimism seen during last week’s session.

However, the Rand likely edged higher on the optimism that many countries were now beginning to ease their lockdown restrictions.

Although, traders flocked back to the safety of the US Dollar today, and according to Monex Europe’s currency analyst, Simon Harvey:

‘This morning’s session is being dominated by risk-averse trading as investors weigh the negative consequences to global growth from another escalation in U.S.-China tensions.


‘The headlines of further tariffs and supply-chain disruptions come at a time where global growth expectations are already fragile, causing currencies such as Sterling and the Euro to trade on the back foot this morning despite exit measures set to be announced or implemented in their respective economies.’


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The Rand was able to benefit from weakness in Sterling, as Britain struggled to make progress in Brexit negotiations. Added to this, increased fears the UK was falling behind the rest of Europe in easing lockdown measures allowing for an economic recovery sent GBP lower.

South African Rand (ZAR) Makes Gains despite Lowest Ever Absa PMI



Meanwhile, the Rand was able to rise on Monday despite data revealing South Africa’s Absa PMI slumped to its lowest-ever level in April.

Activity in the country’s manufacturing sector plummeted as South Africa entered its sixth week of lockdown.

South Africa’s PMI fell from 48.1 in March to a record-low 5.1 in April, with a number of respondents noting zero production has taken place since the start of the lockdown.

In the release, Absa noted:

‘The current reading is about 25 points below the lowest level recorded during the global financial crisis, which suggests that the decline in actual manufacturing output will be well in excess of the drop recorded at the time.’


Added to this, Absa economist Miyelani Maluleke noted:

‘The PMI survey shows the immediate, devastating impact the lockdown had on manufacturing output and overall demand. While some easing of restrictions from May should aid a slow recovery in coming months, a lot of manufacturing capacity will remain idle for some time.’


Pound South African Rand Outlook: UK Services PMI in Focus



Looking ahead to Tuesday, the Pound (GBP) could continue to suffer losses against the South African Rand (ZAR) following the release of the UK services PMI.

If data reveals the UK’s largest sector has slumped to a record-low, Sterling will slide further.

However, if tensions between the US and China increase further, risk sentiment will suffer. If the US ramps up its efforts to blame China for the spread of the coronavirus, the Pound South African Rand (GBP/ZAR) exchange rate will be left largely flat.




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