‘The selling of Sterling may have been connected to buying of Euros
It looks like perhaps people are getting more optimistic about the rollout of a vaccine in the EU and less optimistic about the comparable move in the UK.’
South African Rand (ZAR) Exchange Rates Continue to Capitalise on Market Mood
The South African Rand is a currency often correlated to risk and emerging market sentiment. Because of this, it has been reacting to the big shift in market mood this week.
As the safe haven US Dollar was hit lower by the continued dovishness of the Federal Reserve, investors have been more willing to take risks.
Despite the improving global recovery outlook, most central banks are still hesitant to tighten monetary policy due to the huge uncertainty of the pandemic.
This has made investors more willing to take risks to capitalise on the dovishness of banks and look for higher yields. Bianca Botes, Executive Director at Citadel Global, said:
‘Hopes of a global economic recovery as countries continue their vaccination rollout programmes have led to lower yields and ongoing risk appetite,’
This has been the primary cause of broad South African Rand strength this week.
In fact, the Rand continues to climb despite continued signs of weakness in South Africa’s economic outlook.
Recent South African data continues to show poor economic performance for the start of 2021, as the nation struggles with the coronavirus pandemic.
Pieter du Preez, Senior Economist at NKC African Economics, said:
‘This once again highlights the underlying weakness in the economy and continues to point towards a very soft start to the year,
Although we expect the sector to show some sort of recovery over the coming months, it still faces significant obstacles over the short term’
GBP/ZAR Exchange Rate Forecast: Key Data Could Help Pair Recovery
Next week’s UK economic calendar will be a little busier, and could influence movement in the Pound to South African Rand exchange rate if it surprises.
The week’s data will start with a slew of UK data, due for publication on Tuesday.
Stats due for publication include UK growth, trade balance, production and construction output results from February.
As February was the first full month in which Britain was under its third national lockdown, surprising data could give investors a better idea of how Britain’s economy weathered the lockdown.
Of course, stronger than expected UK growth data would boost hopes for a strong economic recovery and potentially bolster the Pound’s appeal next week.
Investors may also be more willing to buy the Pound again if market sentiment calms and investors become more concerned about South Africa’s economic performance instead.
Key South African data due for publication next week includes February retail sales on Wednesday, and February building permits on Thursday.
Any domestic or global developments in the coronavirus pandemic will also be closely watched by Pound to South African Rand exchange rate investors next week.
TAGS: Pound Rand Forecasts
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