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Pound to South African Rand (GBP/ZAR) Exchange Rate Rises Despite Worries Over Stricker UK Covid-19 Restrictions

January 11, 2021 - Written by John Cameron

GBP/ZAR Exchange Rate Edges Higher Despite UK Restrictions Being Under Review

The Pound to South African Rand (GBP/ZAR) exchange rate rose by 0.7% today, with the pairing currently trading around R20.85.

Sterling rose against the South African Rand (ZAR) today despite concerns over England facing stricter Covid-19 lockdown restrictions as infections rate continue to soar.

The Government’s Chief Medical Advisor, Professor Chris Witty, has urged the public to ‘double down’ on avoiding contact with other people.

This has sparked concerns over further restrictions being announced from Downing Street this week.

Nadhim Zahawi, the UK’s Vaccine Minister, confirmed that restrictions were being reviewed.

Zahawi said:

‘We’re reviewing all the restrictions, but these are pretty tough at the moment. I am worried about supermarkets and people actually wearing masks and following the one-way system and making sure when it’s at capacity they wait outside the supermarket.’

As a result, GBP investors are becoming increasingly concerned about the UK’s economy, which would further suffer from more severe Covid-19 restrictions.

South African Rand (ZAR) Falls on Risk-Off Market Mood

The risk-sensitive South African Rand (ZAR) has suffered from risk-off trade today, with global markets becoming worried about the rising Covid-19 infection rates throughout Europe and the US.

Analysts at Reuters also highlighted South Africa’s slow vaccination programme, saying:

‘South Africa has recorded more than 1.2 million COVID-19 cases, the most on the continent, but it is yet to start vaccinating its population or receive its first doses.

‘A sluggish vaccination programme would dent prospects for recovery in an economy that is forecast to have contracted by at least 7% last year.’

Consequently, ZAR traders are worried that the sluggish rollout of Covid-19 vaccine through South Africa could jeopardise the nation’s economic recovery in the months ahead.

GBP/ZAR Outlook: Could Sterling Suffer from Stricter UK Lockdown Restrictions?

Pound (GBP) traders will be awaiting tomorrow’s release of December’s BRC Retail Sales data.

Any signs of a recovery in the UK’s retail sector would further boost the GBP/ZAR exchange rate.

However, UK markets will be monitoring the nation’s coronavirus developments.

If infection rates continue to soar and Downing Street announces further lockdown restrictions, then we could see Sterling fall.

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