GBP/ZAR Forecast: Pound to South African Rand Exchange Rate Sheds Last Week’s Gains after US Stimulus Passed

March 11, 2021 - Written by Ben Hughes

STORY LINK GBP/ZAR Forecast: Pound to South African Rand Exchange Rate Sheds Last Week’s Gains after US Stimulus Passed

Despite broad optimism that Britain’s economy will gain momentum, the British Pound to South African Rand (GBP/ZAR) exchange rate has been tumbling from its best levels this week. As the South African Rand is bolstered by global sentiment it continues to climb strongly today, and markets now await tomorrows slew of UK data and South African business confidence stats which could still cause a late-week shift in movement.

Last week saw GBP/ZAR open the week at the level of 21.05 and dip, before ultimately advancing and closing the week higher in the region of 21.26.

This week’s movement has been almost the opposite though. At the beginning of the week, GBP/ZAR jumped and touched on a four month best of 21.48, but quickly fell from those highs.

GBP/ZAR has been tumbling since then. At the time of writing on Thursday, GBP/ZAR had shed last week’s gains and was trending in the region of 20.84.

Pound Sterling (GBP) Exchange Rates Lack Drive to Continue that Recent Rally

Following weeks of surging performance in the Pound, the British currency is taking something of a breather this week.

Against many currencies the Pound has been falling today as markets make a risk-on movement, but against the Rand the Pound has been falling for much of the week already.

Britain is still being seen in markets as one of the major economies most likely to recover first from the coronavirus pandemic. Britain’s economy has also started to gradually reopen from its latest lockdown this week as schools reopen.

However, there has been little new in the Pound outlook. Much of what has been driving Sterling higher has been coronavirus recovery divergence, as Britain continues to widen the recovery gap against other major economies.

Without any real upside surprises to the UK outlook lately, the Pound rally has been running out of steam.

This is the primary cause for GBP/ZAR losses in recent sessions, as the rebounding South African Rand is able to easily put in gains against Sterling.

Sterling’s outlook remains optimistic overall though. Brexit and coronavirus concerns have both been generally softening since January, and this is also causing dovish Bank of England (BoE) speculation to fade. Derek Halpenny, EMWA Head of Research for Global Markets at MUFG, said:

‘The prospects or risks of negative rates have been fully removed - that’s important as well,’

South African Rand (ZAR) Exchange Rates Capitalising on Market’s Risk-On Movement

The US Dollar (USD) experienced a surge in demand last week, but this week its movement has been calming and instead markets have been more eager to take risks again.

The South African Rand is a currency often correlated to risk and emerging market sentiment. It has been benefitting lately from hopes that the global economy will recover from the coronavirus pandemic.

While the Rand was already benefitting from higher than expected South African growth data and improvements in domestic vaccine rollout, the currency has been much stronger since last night’s US inflation rate report.

US inflation came in lower than some investors speculated, and the data was seen as putting cold water on any market speculation that the Federal Reserve could become more hawkish and taper quantitative easing (QE) if inflation kept rising.

On top of this, news that the US had finally passed a huge fiscal stimulus package also boosted the Rand.

According to Elisabeth Andreae, Currency Analyst at Commerzbank:

‘In view of the fragile domestic economy, which was already in recession before the outbreak of the pandemic, we continue to see only limited ZAR recovery potential,

The Rand should benefit above all from the postponement of Fed tapering expectations, which we expect to bring about a slight improvement in the environment for EM currencies.’

GBP/ZAR Exchange Rate Forecast: Slew of Key UK Data Could Cause Friday Shift

This week’s UK economic calendar has been fairly quiet thus far, but tomorrow will see the publication of all the week’s most influential UK ecostats.

Surprising UK data could cause the Pound a late-week shift in movement.

UK trade balance, industrial production, manufacturing production and growth rate data from January will all be published. They will give markets a better idea over how Britain’s economy has been weathering the nation’s third coronavirus pandemic lockdown.

Stronger than expected UK data could give the Pound a boost that could help it claw back some ground against the South African Rand before markets close for the week.

On the other hand though, weaker UK data could serve as something of a wake-up call for the recent Pound rally. It may cause markets to reconsider if the Pound has rallied too much despite the mixed health of Britain’s economy.

As for the South African Rand, it will continue to be driven by shifts in market risk-sentiment. South African business confidence data due for publication tomorrow could also influence the Pound to South African Rand exchange rate.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Rand Forecasts