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Pound to South African Rand (GBP/ZAR) Exchange Rate Soars Despite Another UK Lockdown

January 5, 2021 - Written by John Cameron

South African Lockdown Fears Drag on ZAR

The Pound to South African Rand (GBP/ZAR) exchange rate soared by 2% today, with the pairing currently trading around R20.404.

The South African Rand (ZAR) fell today as speculation grows over South Africa’s new lockdown.

South African President Cyril Ramaphosa is expected to address the nation on Wednesday evening, in which is he predicted to announce more stringent lockdown measures.

Additionally, concerns are continuing to grow over South Africa’s new, more infectious, variant of the Coronavirus.

Annabel Bishop, chief economist at Investec, commented:

‘While the [Covid-19 vaccine] rollout plan is a very positive move, concerns will centre on government’s ability to deliver, particularly in the logistics chain given the low temperature the vaccines need to be kept at, and so Eskom’s ability to deliver consistent electricity supply a key worry too.’

As a result, ZAR investors are becoming increasingly concerned for South Africa’s economy, which could suffer a severe setback if the virus proves resistant to the Covid-19 vaccines.

Bishop also added:

‘[South Africa’s] [l]ockdowns continue in attempts to control the spread of Covid-19 but damage economic activity, business and consumer confidence.’

Pound (GBP) Heads Higher as Covid-19 Vaccine Notes Buoy UK Economic Confidence

The Pound (GBP) rose against the South African Rand (ZAR) despite the UK being due to enter another nationwide lockdown to help curb the spread of the Covid-19 virus.

Prime Minister Boris Johnson announced yesterday that rising Covid-19 infections had forced Downing Street to intensify lockdown measures until at least mid-February.

However, Cabinet Secretary Michael Gove warned that the lockdown could last until March.

Mr Gove commented:

‘We can’t predict with certainty that we’ll be able to lift restrictions the week commencing the 15 to 22 [February], what we will be doing is everything we can to make sure that as many people as possible are vaccinated so that we can begin progressively to lift restrictions.’

Despite the rollout of coronavirus vaccines, investors are concerned that the new variants of the virus could increase the rate of infections.

As a result, GBP investors are remaining cautious as the outlook for the UK economy appears increasingly uncertain.

GBP/ZAR Forecast: Could a South Africa Lockdown Further Weaken ZAR This Week?

Pound (GBP) traders will be awaiting tomorrow’s speech from the Bank of England’s (BoE) Governor, Andrew Bailey.

Any downbeat comments about the state of the British economy would be GBP-negative.

However, Sterling could sink lower as the UK officially enters another lockdown this week.

Meanwhile, South African Rand (ZAR) investors will be paying close attention to the South African government tomorrow.

If South Africa (ZAR) announces a nationwide lockdown, which is highly likely, we could see the GBP/ZAR exchange rate continue to soar.

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