GBP to ZAR Exchange Rate Jittery as Investors Await Bigger Coronavirus and Brexit News

July 6, 2020 - Written by Frank Davies

STORY LINK GBP to ZAR Exchange Rate Jittery as Investors Await Bigger Coronavirus and Brexit News

Investors have been hesitant to move too much on the British Pound to South African Rand (GBP/ZAR) exchange rate since markets opened this week. The Pound outlook remains clouded in coronavirus and Brexit uncertainties, but investors are also anxious over how South Africa’s own recovery from the pandemic is unfolding. On top of this, mixed sentiment over the global coronavirus outlook as well as signs of economic rebound are making risk-sentiment mixed.

Last week’s movement in GBP/ZAR was highly volatile. After opening the week at the level of 21.31, GBP/ZAR spent the week jumping up and down. GBP/ZAR touched on a weekly high of 21.53 earlier in the week, before sliding and touching on a fortnight low of 21.08 later in the week.

GBP/ZAR ultimately closed the week at the level of 21.25. This week’s movement has been narrower so far, though it is still jittery. At the time of writing, GBP/ZAR recovered from a dip to near its lows and is trending near the week’s opening levels again.

GBP Exchange Rates Struggle to Find Support despite UK Businesses Reopening

Since Friday, more of Britain’s economy has been reopening from coronavirus pandemic lockdown. More restaurants and pubs are expected to allow business once more.

For now, Britain’s coronavirus count is still gradually falling. However, as ‘second wave’ fears rise globally, markets remain cautious over Britain’s outlook.

According to FXStreet Analyst Yohay Elam however, this may be among the only supportive factors for Sterling:

‘COVID-19 seems to be under control in the UK, where the exception of a localized lockdown in Leicester did not stop Brits in other places from going to the pub. However, that may currently be the only factor supporting Sterling.

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Andrew Bailey, Governor of the BoE, reportedly sent a letter to commercial banks, preparing them for negative interest rates. They may need time to just their systems to such a move – but pressure on the Pound is already seen now.”

Another adverse factor is Brexit, with talks resuming after they were postponed late last week. The gap between the EU and the UK on regulatory alignment remains wide – and no breakthrough is likely anytime soon.’

With UK data still mixed and UK-EU negotiations still seeing no real signs of optimism, the Pound outlook remains marred in uncertainty. A worsening coronavirus outlook may only further damage the Pound outlook.

ZAR Exchange Rates Benefit Avoid Losses amid Lingering Signs of Risk-Sentiment

Investors were hesitant to move too much on the South African Rand either today. While Sterling has been a little weaker than it was last week, the South African Rand has been unable to capitalise on this.

Markets remain anxious about how South Africa’s economy, following a strict lockdown. There are concerns over just how hard South Africa’s economy needed to shut down in recent months.

Plus, while recent South African data has been decent, it is still from too long ago to paint a solid idea over what kind of recovery the nation might see.

According to Carmen Nel, Economist and Macro Strategist at Matrix Fund Managers:

‘We’ve heard much speculation about what the shape of the recovery will be, with talk of a W, a V, an L or even a swoosh/hockey stick. Right now, there’s still a wide range of outcomes on the table, as we’ve started to see jitters in some markets around a second wave of infections, and this has caused some concern about the shape of our recovery,’

As a result, while some lingering risk-sentiment is keeping the Rand from falling, ‘second wave’ concerns persist too much for economic rebound hopes to drive the Rand even higher.

GBP/ZAR Exchange Rate Forecast: South African Data Could Boost Rand Appeal

The Pound to South African Rand exchange rate lacks much in the way of direction today. Both currencies are jittery due to global and local coronavirus uncertainties.

Over the coming days though, more solid developments and data over how Britain and South Africa are handling the pandemic could cause shifts in movement.

Tomorrow will see the publication of South Africa’s Q2 consumer confidence results.

These could be particularly influential. If they show that confidence was higher than expected amid South Africa’s lockdown, hopes for an economic rebound could rise. This could bolster demand for the South African Rand.

More South African data such as production stats due later in the week, could also boost Rand support if they impress.

As for the Pound, Sterling investors will be anticipating a Wednesday Budget Statement from UK Chancellor Rishi Sunak.

Of course, any surprising coronavirus or Brexit developments could also influence the Pound to South African Rand exchange rate.

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