GBP/ZAR Exchange Rate Falls as UK House Prices Drop in May
The Pound to South African Rand (GBP/ZAR) exchange rate fell by -0.2% today, with the pairing currently fluctuating around R21.26.
The GBP/ZAR exchange rate fell today after last night’s release of the flash GfK consumer confidence report for May remained in the doldrums at -36 – its worst level in over a decade. Consequently, Sterling traders have become increasingly jittery of the dimming prospects for Britain’s economy.
Joe Staton, GfK’s client strategy director, commented on the data:
‘Against a backdrop of falling house prices, soaring jobless claims, and with no sign of a rapid V-shaped bounce-back on the cards, consumers remain pessimistic about the state of their finances and the wider economic picture for the year to come.’
Meanwhile, today saw the release of May’s Halifax house prices data, which fell to a worse-than-expected 2.6%.
Russell Galley, Managing Director, Halifax, commented on the report:
‘Looking ahead, we expect market activity to increase progressively as restrictions are eased further across the whole of the UK and we continue to have confidence in the underlying health of the housing market over the long-term.’
South African Rand (ZAR) Rises as Positive Risk Sentiment Buoys Risky Assets
The South African Rand (ZAR) has continued to rise as risk sentiment remains high on the easing of lockdowns globally and the restarting of the global economy.
Yesterday also saw market demand for risky assets rise after the European Central Bank (ECB) announced further stimulus measures to bolster the Eurozone’s economy.
Economists at ETM Analytics commented:
‘The sheer size of the monetary and fiscal support measures out of the developed world in light of the coronavirus shock has driven a risk-on frenzy as a global search for yield has led to financial spill overs into the emerging market space.’
However, following South Africa’s record jumps in Covid-19 since the pandemic hit, South African Rand investors are feeling somewhat more jittery today than at the beginning of the week.
Nevertheless, risk sentiment rose today after Morgan Stanley said that the US would not ‘want to break the phase one trade deal’ with China. With China being South Africa’s largest trading partner, this improved market appetite for the Rand.
Chetan Ahya, Morgan Stanley’s chief economist and global head of economics, said:
‘At this point, our view from an economics standpoint … is as long as we have the phase one deal going on and there is no renewed escalation in terms of tariffs, then the global growth projections that we have should be intact.’
GBP/ZAR Outlook: Could Weak UK Retail Figures Weaken the Sterling?
Pound (GBP) investors will be looking ahead to Monday’s release of the BRC Like-for-Like Retail Sales figures for May. Any further signs of deterioration in Britain’s retail sector would prove GBP-negative.
The South African Rand (ZAR) will continue to be driven by risk-sentiment next week. However, any further signs of improvement between US-China trade relations would boost the risk-averse Rand.
Meanwhile, the GBP/ZAR exchange rate could head higher next week, however, if the UK’s coronavirus situation continues to improve. As a result, Sterling could rise if Downing Street announces further steps to ease the UK’s nationwide Covid-19 lockdown.
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