Pound to South African Rand Falls as SARB Holds Interest Rate at 3.5%

GBP/ZAR Exchange Rate Sinks as Risk Sentiment Boosts Risk-Sensitive Rand

The Pound to South African Rand exchange rate fell today, with the pairing fluctuating around R20.35 at the time of writing.

The South African Rand rose after the South African Reserve Bank (SARB) held its interest rate at 3.5%.

As a result, ZAR has benefited from a sense of relief following an increasing amount of speculation that the SARB could have slashed its interest rates.

Meanwhile, demand for the risk-sensitive South African Rand has risen following the US Presidential Inauguration of the now 46^th President of the United States, Joe Biden.

Kay Van-Peterson, the global macro strategist at Saxo Capital Markets, was also optimistic about the US announcing a large stimulus package.

The Democratic control of the Senate, she said, also increases the likelihood of yet more fiscal stimulus.

Van-Peterson said:

‘That means that this market should be way, way, way higher as a whole and we’re going to get there. We’re entering this regime of even more accelerated asset class inflation.’

Pound Falls as Downing Street Fails to Rule Out Nationwide Lockdown Lasting Until Summer

The Pound fell against the South African Rand today after Prime Minister Boris Johnson failed to rule out the possibility of a UK lockdown lasting until summer.

A Downing Street spokesman said:

‘We will continue to keep all of the scientific evidence and data under review. It remains our position that we want to ease restrictions as soon as it is safe to do so, but in order for us to do that we need to see the transmission rates of the virus come down and we need to see the pressure on the NHS reduce.’

However, GBP investors are becoming more optimistic after 4.6 million people in the UK have been given doses of the Covid-19 vaccine.

As a result, UK markets have remained cautiously optimistic that the Covid-19 vaccine rollout could prompt a steady economic recovery in the months ahead.

Another factor holding back the Pound, however, is today’s news that nearly half of UK manufacturers fear that they will struggle to obtain crucial materials in the first quarter of 2021.

The Confederation of British Industry (CBI) commented:

‘This appears to be linked to widespread COVID-related supply disruption, such as delays in shipments from abroad, a shortage of containers across the world, and knock-on impacts from disruptions to production over 2020.

‘Border challenges and customs-related delays arising from Brexit also appear to be playing a role.’

GBP to ZAR Forecast: Could Improving Risk Sentiment Further Boost the South African Rand?

Pound investors will be awaiting tomorrow’s release of the flash UK Markit Services PMI for January.

Any improvement in the UK’s largest sector would prove GBP-positive.

Tomorrow will also see the release of the latest GfK Consumer Confidence data for January.

The South African Rand will likely continue to be uplifted by improving risk sentiment following the US presidential inauguration of US President Joe Biden.

Any further signs that the US will unveil substantial fiscal stimulus measures, therefore, would be ZAR-positive.