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GBP/ZAR Outlook: Pound to Rand Exchange Rate Struggles to Advance as Rand Rebounding

January 13, 2021 - Written by Ben Hughes

Despite the Pound rebounding as negative interest rate bets fade, the British Pound to South African Rand (GBP/ZAR) exchange rate is struggling for direction this week. The Pound is unable to sustain much further gains against the South African Rand, as the Rand rebounds from weeks of huge losses. Still, if the Rand rebound runs out of steam there may be more gains ahead for the pair.

Following last week’s jump from the level of 20.11 to 20.75, GBP/ZAR has continued to trend with an upside bias this week.

Yesterday, GBP/ZAR touched on a high of 21.09. This was the best level for GBP/ZAR in over two months, since the end of October.

Since then, GBP/ZAR movement has been more modest and the pair has been unable to hold too far from the week’s opening levels. At the time of writing on Wednesday afternoon, GBP/ZAR was trending near the level of 20.85.

GBP Exchange Rates On Upside Trend Amid Bank of England and Vaccine Speculation

The Pound has been rebounding from lows this week, as investors reassess the perceived chances of negative interest rates from the Bank of England (BoE).

Since a third national lockdown was announced for Britain, speculation had been rising that the Bank of England could be pressured into utilising negative interest rates to support Britain’s economy.

However, yesterday Bank of England Governor Andrew Bailey said that negative rates had a lot of issues.

While he remained highly concerned about Britain’s economic outlook amid the coronavirus pandemic, his comments were taken as a sign that the bank was not ready to implement negative rates just yet.

Bets of negative rates were pushed back until later in the year, and the Pound experienced a relief rally.

This combined with hopes for a bigger coronavirus vaccine rollout in Britain has boosted demand for the British currency.

According to Fawad Razaqzada, Market Analyst at ThinkMarkets, some of the Pound’s biggest woes could be behind it:

‘With the Pound starting to look strong at the start of this year, I reckon it could be among the best-performing major currencies in the months ahead now that a no-deal Brexit has been avoided.

With the UK also being among the first countries to roll out the Covid vaccines, this could see the economy rebound sharply once lockdowns end, providing sterling an additional boost.’

ZAR Exchange Rates Calm after This Week’s Rebound

After weeks of broad losses on South African coronavirus jitters, the South African Rand has seen a strong recovery rebound this week.

If not for the Pound’s own resilience, GBP/ZAR could have been pushed lower due to the Rand’s broad gains in recent sessions.

This was partially due to new optimism in South Africa’s own coronavirus vaccine situation. South Africa has secured more vaccines over the past week, which has helped cool market sentiment somewhat.

On top of that, the South African Rand is gaining as the US Dollar’s recovery rally runs out of steam.

Overall, investors are hesitant to keep selling the South African Rand and are buying it from its cheap lows.

Yesterday’s South African manufacturing production data was disappointing, fall short of expectations in both monthly and yearly prints.

Still, markets were already concerned about the health of the sector amid the pandemic so it did little to surprise investors or cause a shift in ZAR movement.

GBP/ZAR Exchange Rate Forecast: Pair Could Advance More Easily if Rand Rebound Runs Out of Steam

The South African Rand has been rebounding this week, but investors may be hesitant to keep buying the currency without any fresh reason to keep buying it.

Tomorrow will see the publication of South Africa’s December business confidence results. If these beat expectations, they could give the South African Rand a little boost.

Tomorrow’s Pound to Rand exchange rate movement could also be influenced by potential comments from Bank of England (BoE) officials.

If the bank continues to play down the chances of negative interest rates, or if Britain’s coronavirus situation shows signs of improving, the Pound could keep climbing.

On the other hand, a surprise worsening of Britain’s outlook could cause the Pound to weaken and make it easier for the Rand to advance.

Friday will see the publication of Britain’s November production and growth stats. These could also be closely watched by Pound to South African Rand exchange rate investors.
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