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Pound to South African Rand (GBP/ZAR) Exchange Rate Rises as South African Coronavirus Cases Increase

July 10, 2020 - Written by John Cameron

GBP/ZAR Exchange Rate Edges Higher as South Africa’s Economic Outlook Darkens

The Pound to South African Rand (GBP/ZAR) exchange rate rose by 0.7% today, with the pairing currently trading around R21.37.

The South African Rand (ZAR) has continued to struggle today after yesterday saw the latest South African Manufacturing Output figures for June fall by -49.4% in April.

StatsSA, the South African statistics agency, commented:

‘The COVID-19 pandemic and lockdown regulations since 27 March 2020 have had an extensive impact on economic activity.’

Meanwhile, South Africa is facing a coronavirus ‘storm’ as outbreaks of the virus spread across the continent. New Covid-19 cases in Africa are up by 24%, leaving many investors concerned for South Africa’s economy as lockdowns intensify.

South Africa’s Health Minister, Zweli Mkhize, warned that there could be a shortage of hospital beads to treat Covid-19 in a matter of weeks.

Mr Mkhize added:

‘It’s no longer a matter of announcing numbers of confirmed cases. We are now at a point where it’s our fathers, mothers, brothers, sisters, close friend and comrades that are infected.’

Pound (GBP) Edges Higher as the UK Economy Continues to Reopen

The Pound (GBP) rose against the South African Rand (ZAR) today as hopes grow for the UK’s economic recovery as gyms, pools, and nail bars are set to reopen throughout England. As a result, GBP investors are becoming more hopeful about the UK’s economic progress in the months ahead.

Today also saw the British Retail Consortium (BRC) show that shoppers remain thin on the ground even after the reopening of retail shops in June.

Helen Dickinson, chief executive of the BRC, commented:

‘With lockdown measures easing, consumers are slowly re-emerging onto their high streets, shopping centres and retail parks. Footfall levels are still well below pre-coronavirus levels; however, the decline was softer than it was in May thanks to the reopening of non-essential stores on 15 June.’

However, concerns for the British economy are also growing after the ratings agency Moody’s said that the UK faces the fastest peak-to-trough in GDP within the G20.

Moody’s also said that the UK could be looking at a contraction in its GDP by 10.1% in 2020. Consequently, GBP investors are becoming increasingly jittery as the UK economy looks set for a severe slump this year.

GBP/ZAR Forecast: Could Rising South African Covid-19 Cases Drag Down the South African Rand?

Sterling investors will be looking ahead to Monday’s speech by the Governor of the Bank of England, Andrew Bailey. Any dovish comments about the British economy, however, would prove GBP-negative.

Monday will also see the release of the latest BRC retail sales figures for June. If the UK’s retail sector improvement last month would buoy the GPB/ZAR exchange rate.

The GBP/ZAR exchange rate will remain sensitive to risk-sentiment next week. Any signs of South Africa suffering from a second wave of coronavirus infections would weigh on the South African Rand.

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