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Pound to South African Rand (GBP/ZAR) Exchange Rate Falls as South Africa’s GDP Rises in Third Quarter

December 8, 2020 - Written by John Cameron

GBP/ZAR Exchange Rate Sinks Despite Rising Concerns Over South Africa’s Economic Future

The Pound to South African Rand (GBP/ZAR) exchange rate fell by -0.9% today, with the pairing currently trading around R20.033.

The South African Rand (ZAR) rose today following the release of South Africa’s Gross Domestic Product data for the third quarter, which beat forecasts and rose by 66.1%.

Africa economist Boingotlo Gasealahwe was pessimistic, however:

‘The recovery is already losing momentum while a resurgence in Covid-19 may call for tighter containment measures. We expect only a modest recovery until vaccines become widely available.’

As a result, ZAR investors are becoming increasingly cautious as the global economy is expected to have suffered severely from the Covid-19 crisis in the fourth quarter and in 2021.

Additionally, the end of temporary economic support measures means that the South African economy could be significantly less robust in Q4.

That said, the risk sensitive South African Rand is benefiting from improving risk sentiment, driving investors to trade in the South African currency.

The global economic outlook improves on news of a Covid-19 vaccine rollout.

Pound (GBP) Dips as UK-EU Brexit Talks Make Slow Progress

Sterling suffered today following comments from Downing Street that achieving a post-Brexit trade agreement with the EU was proving ‘very, very difficult’.

Consequently, GBP investors have become increasingly jittery on the prospect of a no-deal Brexit at the year-end.

However, some progress has been made, with the UK dropping plans to break international law over the Northern Ireland protocol.

As a result, this has boosted confidence in UK markets as this has increased the likelihood of a potential UK-EU trade agreement going forward.

Nevertheless, with Brexit talks still largely hanging in the balance, UK markets are remaining cautious.

In UK economic news, today saw the release of the latest UK BRC Like-For-Like Retail Sales for November, which climbed by 7.7%.

The UK’s nationwide lockdown, however, limited retail sales last month, leaving many traders cautious of trading in GBP.

Helen Dickinson, the chief executive of the British Retail Consortium, said that ‘[s]ome retailers were able offset a proportion of lost sales through greater online and click-and-collect sales, ensuring they could still serve their customers.’

GBP/ZAR Forecast: Could Positive Brexit Trade Deal News Send Sterling Soaring?

South African Rand (ZAR) traders will be awaiting tomorrow’s release of the latest SA Business Confidence Index for October.

Any improvement in the outlook for the South African economy would befit the South African Rand.

Meanwhile, risk sentiment is expected to improve with widespread rollouts – across UK and Europe – of the Covid-19 vaccine.

As a result, we could see the ZAR/GBP exchange rate head higher.

However, we could see the GBP/ZAR exchange rate begin to soar if news emerges of a possible post-Brexit trade agreement between the UK and the EU.

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