GBP to ZAR Exchange Rate Slips Back from 3-Month-Highs amid Poor UK Data

August 11, 2020 - Written by Ben Hughes

STORY LINK GBP to ZAR Exchange Rate Slips Back from 3-Month-Highs amid Poor UK Data

After another advance attempt at the beginning of the week, the British Pound to South African Rand (GBP/ZAR) exchange rate slipped back today. Investors were hesitant to keep buying the pair higher amid a lack of strong support for the Pound outlook, but the South African Rand remained overall unappealing due to global concerns about the coronavirus pandemic.

Will GBP/ZAR be able to mount another week of advances? GBP/ZAR put in strong, solid gains last week, opening at the level of 22.33 and climbing fairly sturdily throughout the week. GBP/ZAR closed last week at the level of 23.02.

GBP/ZAR also touched on a high of 23.22 towards the end of last week, which was the best level for the pair in three months since May.

While GBP/ZAR briefly neared these quarterly highs again yesterday though, the pair has struggled to continue its advances this week. At the time of writing on Tuesday, GBP/ZAR is sliding again and trends just below the week’s opening levels.

GBP Exchange Rates Unappealing as UK Job Market Remains Filled with Uncertainties

Since last week, investors have been more eager to buy the Pound as the British currency rebounds from its cheapest levels.

Investors found the Pound more appealing after the Bank of England (BoE) said that Britain’s economy was weathering the coronavirus pandemic this year better than expected, and raised its 2020 economic forecasts.

However, many concerns persisted in the bank’s outlook, and the bank also left the door open for negative interest rates.

As a result of these persisting concerns, the Pound struggled to keep climbing today as the latest key UK ecostats were filled with uncertainties as well.

Britain’s latest job market data showed that Britain’s key unemployment rate remained low, but the other details of the report indicated that the true health of the job market was not yet reflected in this key stat.

According to Larry Elliott, Economics Editor at The Guardian:

‘The true state of the labour market has been veiled by two things. First, and most obviously, Rishi Sunak’s job retention scheme has meant millions of workers have been furloughed since March. In the absence of 80% wage subsidies, many of them would have been laid off.

Second, the way the figures are compiled means that someone is counted as unemployed only if they are both out of work and seeking employment. There hasn’t been much point in looking for a job while the economy has been locked down, so people have been classified as inactive rather than jobless. The government’s alternative measure of unemployment – the claimant count – provides a better guide to what has been happening. It has doubled since the start of the Covid-19 crisis and rose by 94,000 in July to stand at 2.7 million.’

Overall, the data still paints a grim picture for UK jobs and this knocked Sterling slightly today.

ZAR Exchange Rates Struggle for Footholds as Global Coronavirus Outlook Worsens

Investors have been hesitant to buy the South African Rand in recent weeks, due to its correlation with emerging market assets.

As the global coronavirus pandemic looks more and more likely to suffer a ‘second wave’ of infections, investors are hesitant to buy emerging market assets. The global economy appears to not have weathered the pandemic as well as was hoped earlier in the year.

The South African Rand has seen significant losses in recent weeks as global coronavirus fears worsen, and the US Dollar (USD) sees rebound attempts.

According to Dr Azar Jammine, Senior Economist at Econometrix:

‘Internationally, there have been concerns that the spread of the coronavirus is not slowing down and that as a consequence countries may be forced to lockdown or restrict consumer practices and distancing yet again.

As a consequence, global economic growth may not recover to the extent that people might have hoped for,’

Today’s mixed South African production data also did little to influence the Rand.

GBP/ZAR Exchange Rate Forecast: UK Growth Report and Coronavirus in Focus

Investors are hesitant to move too much on either the Pound or the South African Rand, but that could change in the coming days as markets react to more data and coronavirus news.

Wednesday will see the publication of most of this week’s remaining key data.

Britain’s Q2 Gross Domestic Product (GDP) growth rate stats will be the biggest focus of the day. UK trade balance and production figures from June could also influence the Pound’s strength.

Rand investors will be focused more on South Africa’s June retail sales results, also due for publication tomorrow. On Thursday, South African mining data will be published.

If these South African stats impress investors they could boost Rand support. However, if the global coronavirus outlook continues to worsen the South African Rand is likely to remain unappealing overall.

Signs of how the coronavirus pandemic continues to unfold in Britain and globally will of course remain influential for the Pound South African Rand exchange rate as well.

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