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Pound to South African Rand (GBP/ZAR) Exchange Rate Falls as Chinese Exports Hit Record Highs in 2020

January 14, 2021 - Written by John Cameron

GBP/ZAR Exchange Rate Sinks as Chinese Data Boosts Risk Appetite

The Pound to South African Rand (GBP/ZAR) exchange rate fell by -0.4% today, with the pairing currently trading around R20.703.

The South African Rand (ZAR) benefited from news that China – one of South Africa’s largest trading partners – ended 2020 with a record trade surplus, with exports never being higher.

Larry Hug, Chief China Economist at Macquarie Capital, commented:

‘Amid all the noises on de-coupling and de-globalization, somewhat unexpectedly, the pandemic has deepened the ties between China and the rest of the world.’

As a result, demand for the risk-sensitive ZAR has risen on growing hopes that China – the world’s second largest economy – could be on the mend.

This also bodes well for South Africa’s economy, which relies heavily on its trade relationship with Beijing.

However, limiting demand for the South African Rand is South Africa’s rising Covid-19 cases, with still no clear signs of a sufficient vaccine rollout programme.

Pound (GBP) Falls Despite UK Pharmacies Gearing Up to Rollout Covid-19 Vaccine

The Pound fell against the South African Rand today despite the announcement that UK pharmacies would begin to rollout Covid-19 vaccines.

This also follows news that the UK would be establishing 24/7 Covid-19 vaccine centres, which promise to speed up the nationwide vaccination programme.

However, with the UK’s Covid-19 death toll expected to remain at high levels for ‘some weeks’, according to the Sir Patrick Vallance, the Government’s Chief Scientific Advisor, GBP investors are becoming more cautious.

Mr Vallance was, however, optimistic about lockdown measures, saying:

‘I think the existing restrictions ... are making a difference and you can see that. What we know now - that we didn’t know a few weeks ago - was, would these sorts of restrictions be enough to bring this virus under control with the new variant? And the answer is yes. It looks like it is, and things are flattening off, at least in some places.’

Today has also saw mixed UK retail news, with Tesco receiving a significant boost in sales over Christmas, while Primark is expected to lose billions due to lockdown restrictions.

Consequently, UK markets are remaining cautious as the outlook for the British economy remains largely uncertain, despite progress in Covid-19 vaccine rollouts.

GBP/ZAR Outlook: Could Weak UK Growth in 2020 Drag Down Sterling?

Pound (GBP) traders will be awaiting tomorrow’s release of November’s UK GDP data.

Any signs of a significant downturn in the UK’s growth last year would be GBP-negative.

Tomorrow will also see the publication of the latest UK Industrial and Manufacturing Production data for November.

Again, if this points to a struggling UK economy, we could see Sterling suffer.

However, if the British Government’s Covid-19 vaccination programme appears to be making progress, we could see the GBP/ZAR exchange rate head higher.

Meanwhile, the South African Rand will be driven by global risk sentiment.

If the outlook for China’s economy continues to improve, we could see ZAR head higher.

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