September 25, 2020 - Written by Frank Davies
STORY LINK Pound South African Rand (GBP/ZAR) Exchange Rate Sees Limited Gains on Fears of UK Job Losses
Underwhelmed Reaction to UK Chancellor’s Plan Limits Pound South African Rand (GBP/ZAR) Exchange Rate Strength
Muted market reaction UK Chancellor Rishi Sunak’s newly announced Winter Economic Plan saw the Pound Sterling to South African Rand (GBP/ZAR) exchange rate falter.
Investors were ultimately disappointed by the level of fiscal support pledged in the announcement, with the government scaling back its commitment to support wages.
With the new job support scheme only subsidising 22% of wages for workers in ‘viable’ jobs fears of an impending wave of job losses picked up.
Even so, as market risk appetite remained muted on Friday the South African Rand found little opportunity to push higher against its rival.
As the prospect of the global economy losing momentum once again in the final months of the year grew this limited the appeal of the risk-sensitive Rand.
Signs of Higher SA Inflation May Boost South African Rand
However, with South Africa’s president Cyril Ramaphosa having announced the reopening of the country’s borders as Covid-19 restrictions ease this kept a floor under ZAR exchange rates.
Hopes of the South African economy beginning to recover from the negative impact of the pandemic may see the Rand gaining ground in the days ahead.
A rallying point could be in store for ZAR exchange rates if Monday’s producer price index readings prove encouraging.
If inflationary pressure shows signs of picking up in August this may offer the South African Rand a leg up against its rivals.
As higher levels of inflation would give the South African Reserve Bank (SARB) less cause to cut interest rates again before the end of the year the GBP/ZAR exchange rate could weaken in the wake of the data.
Nevertheless, as long as market risk appetite remains generally muted this may hamper the Rand’s ability to stage any particular surges.
Lower Level of UK Mortgage Approvals Set to Weigh on GBP/ZAR Exchange Rate
Worries over the second wave of Covid-19 infections could see the Pound struggle to find any particular sense of bullishness next week.
Unless the infection rate shows signs of stabilising fears of a further tightening of social restrictions could weigh on GBP exchange rates, given the existing pressures already facing the economy.
The mood towards the Pound may also sour in response to Tuesday’s UK mortgage approvals data, with forecasts pointing towards a significant dip in lending in August.
Evidence that the housing market remained under pressure last month would add to worries over the underlying health of the UK economy, exposing the Pound to renewed selling pressure.
Unless mortgage approvals show signs of picking up the GBP/ZAR exchange rate may remain on a weaker footing.
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TAGS: Pound Rand Forecasts