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Pound South African Rand (GBP/ZAR) Exchange Rate Gains as Investors Flock Back to Safety

July 16, 2020 - Written by John Cameron

Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Rises as China’s Data Pours Water on Previous ZAR Rally

The Pound Sterling South African Rand (GBP/ZAR) exchange rate edged around 0.4% higher on Thursday as risk appetite slumped. This left the pairing trading at around R20.9422.

The South African Rand weakened today, pausing after its recent rally which sent the currency to one-month highs.

Weak Chinese data weighed on hopes for a swift global economic recovery from the coronavirus crisis.

The unexpected fall in China’s retail sales, weighed on the recent upswing in enthusiasm and caused investors to flock back to safe-haven assets such as the US Dollar (USD).

According to NAB foreign exchange strategist, Rodrigo Catril:

‘While in general it’s fair to say that the numbers beat expectations, what the numbers also reveal is that we’re seeing that the China consumer remains behind in terms of the recovery story.’

This reversed the Rand’s rally from Wednesday, as riskier assets were supported by upbeat reports about a coronavirus vaccine.

US firm, Moderna’s experimental vaccine was shown to be safe and triggered immune system responses to the coronavirus in all healthy volunteers.

Pound (GBP) Struggles as Job Vacancies Plummet to Record Low

Sterling struggled to make significant gains today as risk aversion weighed on both GBP and the Rand. This also strengthened the safe-haven US Dollar which limited Pound gains.

Upbeat Chinese GDP data did little to boost sentiment after this was offset by the fifth consecutive slump in China’s retail sales. This was an unwelcome sign for the rest of the world including the UK that are struggling to emerge from coronavirus lockdowns.

The Pound was able to make some gains after data showed the slump in the job market eased. May’s unemployment rate remained steady at 3.9%.

However, the data did not include the most recent slew of job losses in the UK caused by the coronavirus crisis.

Rony Nehme, chief market analyst at financial research firm Squared Financial noted:

‘We still believe going forward the UK faces issues and think the economy will fare worse than others in Europe.’

Added to this, June’s data showed that the number of employees on company payrolls had tumbled by around -649,000 in the quarter to June.

The labour market showed further signs of weakness as job vacancies slumped. In the three months to June, data showed vacancies plummeted to the lowest level since the data series began in 2001.

The Office for National Statistics (ONS) noted:

‘This is 23% lower than the previous record low in April to June 2009.’

Pound Rand Outlook: Will Consumer Confidence Buoy GBP?

Looking ahead, the Pound (GBP) could edge higher against the South African Rand (ZAR) following the release of GfK’s consumer confidence data.

If July’s flash confidence edges higher than expected as lockdown measures continue to be eased, it will offer Sterling support.

Meanwhile, Rand traders await the latest SACCI business confidence data for both June and May.

If confidence disappoints investors, it will weigh on ZAR and send the Pound South African Rand (GBP/ZAR) exchange rate higher.

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