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Pound to South African Rand (GBP/ZAR) Exchange Rate Steady as South African Economy Suffers From Strict Covid-19 Lockdowns

September 7, 2020 - Written by John Cameron

GBP/ZAR Exchange Rate Rangebound as Analysts Expect ‘Very Big’ Contraction for South African Economy

The Pound to South African Rand (GBP/ZAR) exchange rate held steady today, with the pairing currently trading around R22.022.

The South African Rand (ZAR) suffered today following reports that the South African economy could have contracted over 50% in the second quarter because of the severe nationwide Covid-19 lockdown.

Nazmeera Moola, Head of SA Investments at Ninety One, commented:

‘We had one of the strictest lockdowns in the world, so we would expect a very big Q2 contraction. For Q3, some indicators are quite strong at this point in time, including electricity consumption, hence the load shedding, and agriculture and mining, and some retail and home sales.’

Meanwhile, South African Rand (ZAR) investors have become more optimistic after South Africa’s Health Minister Dr Zweli Mkhize said that the nation had passed the first wave of positive coronavirus cases. He did, however, warn citizens to remain cautious of a possible second-wave.

Mr Mkhize said:

‘The sooner we can get to level one the better. The sooner we have a normal economy the better. It is better for the country. We are hoping South Africans will understand that to get there, we have to make sure we are just as cautious in level two, so that there is no resurgence.’

Pound (GBP) Steady as Concerns Over a No-Deal Brexit Weigh on British Markets

The Pound (GBP) fell against many of its peers today following news that Downing Street was in the process of ‘clarifying’ the Brexit Withdrawal Agreement.

As a result, Sterling traders have become worried that this could jeopardise the delicate relations between the UK and the EU and force a possible no-deal Brexit at the end of the year.

Jim Reid, a research strategist at Deutsche Bank, commented:

‘This has certainly raised the stakes at a fraught time in talks. The UK seem to be briefing hard in the media that they are quite prepared to walk away from talks if no progress is made.’

In UK economic news, Sterling traders will be looking ahead to this evening’s release of the BRC Retail Sales report for August. Any improvement could buoy confidence in the UK’s retail sector and benefit the GBP/ZAR exchange rate.

GBP/ZAR Forecast: Could Weak South African GDP Drag Down ZAR?

South African Rand (ZAR) investors will be looking ahead to tomorrow’s release of the South African GDP figure for the second quarter. Any significant contraction would prove ZAR-negative.

Sterling investors will be looking ahead to Wednesday’s UK RICS Housing Price Balance figure for August. If this confirms forecasts and rises by 25%, then we could Sterling begin to edge higher against the South African Rand.
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