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Pound to South African Rand (GBP/ZAR) Exchange Rate Rises as Increasing Covid-19 Cases Dampen Risk Appetite

July 20, 2020 - Written by John Cameron

GBP/ZAR Exchange Rate Edges Higher as Doubts Grow for South Africa’s Economic Recovery

The Pound to South African Rand (GBP/ZAR) exchange rate rose by 0.9% today, with the pairing currently trading around R21.11.

The South African Rand (ZAR) suffered today after a global surge of Covid-19 infections dampened risk-sentiment.

TreasuryOne currency trader Andre Botha commented:

‘We start the trading week on a subdued risk negative footing as the surging number of COVID-19 cases once again weighs on markets.’

Meanwhile, ZAR investors are remaining cautious as the number of coronavirus cases in South African continues to rise.

Additionally, twenty-two new cases have been reported in the northwest region of Xinjiang, China.

As a result, South African traders are becoming increasingly concerned that the world’s second largest economy could be compromised by a possible second-wave of Covid-10.

US-China tensions are also weighing on the risk-sensitive South African Rand today, with new rivalries between the two superpowers entering volatile territory.

Pound (GBP) Rises Despite Increased Concerns for British Retail Sector

The Pound (GBP) has continued to benefit from last week’s comment from the Bank of England’s (BoE) Governor, Andrew Bailey, who said that the British economy is beginning to pick up. However, Bailey also dampened hopes of a V-shaped recovery.

Analysts at Reuters summarised Bailey’s comments:

‘There were signs of activity returning “quite strongly” in the housing market and in new car sales, but not in hospitality and entertainment, which employ large numbers of people, many of them on low pay, he said.’

‘There was a “very big question” about how cautious people would be about returning to life as before the crisis and there were also risks of a second wave of COVID-19, or localised outbreaks.’

Meanwhile, concerns have begun to grow for the UK’s retail sector after the retail giant Marks & Spencer announced that it would be cutting 950 jobs due to the Covid-19 crisis.

GBP/ZAR Outlook: Could Covid-19 Vaccine Hope Boost Risk Appetite?

Pound (GBP) investors are looking ahead to tomorrow’s release of the UK’s Public Sector Net Borrowing figure for June. Any indications that the UK’s economy could be on the road to recovery would prove GBP-positive.

However, GBP traders will be keeping a close eye on Brexit developments. If UK-EU trade talks improve and show some signs of compromise, then we could see Sterling rise on hopes of a post-Brexit trade deal.

The South African Rand (ZAR) will remain sensitive to risk-sentiment this week. As a result, ZAR could continue to struggle if Covid-19 cases continue grow worldwide.

The GBP/ZAR exchange rate could also fall this week if hopes for a coronavirus vaccine improve risk-sentiment. Consequently, the South African Rand could begin to claw back some of its loses.

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