Pound South African Rand Exchange Rate Outlook Mixed as Both Currencies Strengthen

Pound South African Rand Exchange Rate Struggles to Recover despite GBP Rally

The Pound (GBP) is rallying against some major rivals today, but the Pound South African Rand (GBP/ZAR) exchange rate is struggling to recover. The South African Rand (ZAR) also remains appealing as market confidence continues to improve.

Since opening this week at the level of 20.69, GBP/ZAR has been tumbling. The Rand pushes GBP/ZAR lower as it benefits from the market’s risk-on rally, as well as hopes for South Africa’s vaccination scheme.

GBP/ZAR touched on a weekly low of 20.29 yesterday. Despite the Pound’s rally attempt though, GBP/ZAR is only trending a little higher in the region of 20.36 at the time of writing.

Unless tomorrow’s UK data impresses, the Pound to Rand exchange rate may struggle to sustain a recovery.

Pound (GBP) Exchange Rates Rally on Market Optimism and UK Economic Hopes

The Pound has been advancing due to higher optimism around Britain’s economic outlook today.

Not only did yesterday’s UK inflation rate report beat forecasts, but investors are also becoming more optimistic about Britain’s coronavirus vaccine schemes.

These factors have boosted the UK outlook. Hopes that Britain will recover from the coronavirus pandemic is driving the Pound’s strength this week.

CHAPS retail consumer purchases were on average 4% greater in December 2020 than in February 2020.

This increase was driven by staples and delayable spending, such as in supermarkets and other retail stores, which typically increase in December https://t.co/848wJKhoCo pic.twitter.com/mzJ96HBIRd
— Office for National Statistics (ONS) (@ONS) January 21, 2021

South African Rand (GBP/ZAR) Exchange Rates Remain Strong as Market Optimism Rises

The South African Rand is a currency often correlated to risk and emerging market sentiment. As a result, it has benefitted considerably from global recovery hopes this week.

There was some market uncertainty earlier in the week, amid concerns of potential civil unrest at the inauguration of US President Joe Biden.

However, the inauguration ultimately went smoothly with no shocks or threats to stability. As a result, market optimism has since strengthened even more. Investors are now looking to a potentially huge stimulus package in the US.

According to Bianca Botes, Executive Director at Peregrine Treasury Solutions:

‘Risk-on environment continues to favour Rand
The Rand held steady overnight, as optimism around stimulus remains high.’

Pound South African Rand (GBP/ZAR) Exchange Rate Could See Late-Week Shift

There is potential for the Pound to South African Rand exchange rate to extend its recovery attempts before markets close for the week.

This depends on how markets digest this afternoon’s South African Reserve Bank (SARB) policy decision, as well as tomorrow’s UK ecostats.

If the SARB decision is perceived as more dovish, the Rand’s recent resilience could soften. GBP/ZAR would rise even more if tomorrow’s UK data impresses.

Tomorrow will see the publication of UK retail sales results from December, and Markit’s January PMI projections.

If these beat expectations, it will boost hopes that Britain’s economy is weathering the coronavirus lockdown well. This would help the Pound to continue its rally through the end of the week.

Still, even if UK data impresses, continued market appetite for risk taking may only keep pressure on the Pound South African Rand (GBP/ZAR) exchange rate.

FCF