June 22, 2020 - Written by John Cameron
STORY LINK Pound South African Rand (GBP/ZAR) Exchange Rate Rises on Record Jump in Covid-19 Cases
Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Jumps 1% as Covid-19 Cases Continue to Rise
The Pound Sterling South African Rand (GBP/ZAR) exchange rate traded around 1% higher, leaving the pairing trading at around R21.5788.
The South African Rand remained under pressure today as investors remained cautious as they attempt to navigate the growing number of coronavirus infections.
The total number of worldwide cases jumped above 8.8 million and markets worried about whether this would mean fresh lockdown restrictions in some countries.
Added to this, on Sunday the World Health Organization (WHO) reported its largest single-day increase after the number of cases rose by over 183,000.
Risk appetite also remained under pressure after moves to reintroduce lockdown measures from Beijing and some parts of Australian in response to an increase in cases.
Sterling (GBP) Jumps on BoE Bailey Comments
The Pound was able to rise against the South African Rand today after comments from the Bank of England’s (BoE) Governor.
BoE chief, Andrew Bailey said the bank would be changing its strategy on unwinding stimulus measures when the time is right.
Writing for Bloomberg, the bank’s governor said it aims to reverse some of its quantitative easing programme before it considered raising interest rates.
According to Andrew Bailey:
‘When the time comes to withdraw monetary stimulus, in my opinion it may be better to consider adjusting the level of reserves first without waiting to raise interest rates on a sustained basis.’
British Factories Suffer Record Decline in Output
However, Sterling gains were likely limited after data from the Confederation of British Industry (CBI) showed British factories suffered the worst decline on record.
Industrial output suffered its largest quarterly decline on record during the second quarter due to disruptions caused by the coronavirus pandemic.
Sentiment was left dampened as factory bosses also fear further falls in the months ahead, undermining hopes for a rapid recovery from the coronavirus crisis.
Tom Crotty, group director of chemicals producer INEOS and chair of the CBI’s manufacturing council said:
‘The COVID-19 crisis has been hugely challenging for the manufacturing sector, and these figures reflect the tough circumstances faced by firms across the country.’
CBI’s Deputy Chief Economist, Anna Leach has urged the government to continue supporting the industry until the coronavirus crisis is over. She noted:
‘The UK manufacturing sector remained in a deep downturn in June due to the ongoing COVID-19 crisis. Output volumes declined at a new record pace and export order books fell to an all-time low, reflecting the significant fall in demand in the UK and abroad. Firms are again hoping that this will ease somewhat in the next three months.
‘The Government has already undertaken a huge amount of work to provide financial lifelines to businesses throughout this unprecedented period. With firms having been encouraged to restart operations, the Government must continue to engage with the sector to understand their specific concerns and provide support as needed.’
Pound Rand Outlook: South African Unemployment in Focus
Looking ahead, the South African Rand (ZAR) could continue to slide against the Pound (GBP) following the release of unemployment data.
If South Africa’s unemployment rate jumps higher than expected in the first quarter due to the coronavirus crisis, the Rand will extend today’s losses.
Meanwhile, Sterling could receive a boost if the Prime Minister announces lockdown measures will be further eased next month.
The Pound South African Rand (GBP/ZAR) exchange rate will rise if Boris Johnson announces the hospitality sector will be allowed to reopen on 4 July and the 2m social distancing rule will be relaxed.
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