GBP/ZAR Exchange Rate Edges Higher as South Africa’s Economy Struggles
The Pound to South African Rand (GBP/ZAR) exchange rate rose by 0.4% today, with the pairing currently trading around R23.465.
The South African Rand (ZAR) failed to benefit from the South African’s Government discussion of new measures to contain the coronavirus’ negative impact on the South African economy.
Instead, ZAR investors will be looking ahead to South African President Cyril Ramaphosa’s national address in which the leader is likely to announce additional economic and social relief measures to strengthen the nation’s struggling economy.
Additionally, Cyril Ramaphosa is expected to outline a post-lockdown Economic Recovery Plan. Consequently, we could see ZAR edge higher if this effectively reduces the negative economic fall out of Covid-19 on the nation’s fragile economy.
However, South Africa’s Ministry of Employment and Labour were downbeat in their statement:
‘The coronavirus pandemic has quickly evolved from a health care crisis to a financial one, closing non-essential businesses, leading to job losses, and sending economies to recession worldwide. Many South Africans are filing for unemployment insurance fund and compensation fund.’
The ZAR/GBP exchange rate has also struggled on dwindling risk sentiment after yesterday saw US oil prices drop into negative territory.
Consequently, markets are becoming increasingly concerned that a near-term global recession, thanks to the coronavirus pandemic, could further harm South Africa’s heavily industrialised economy.
Pound (GBP) Rises Despite Poor UK Unemployment Before Covid-19 Crisis
The Pound (GBP) edged higher against the weaker South African Rand (ZAR) following today’s UK Unemployment Rate report for February, which rose to a worse-than-expected 4%.
However, Sterling investors were unphased by Britain’s unemployment data today, with the report reflecting a period before cases of the coronavirus were detected in the UK.
Instead, markets will be looking ahead to March’s and April’s data, which will be far worse due to the nationwide lockdown.
Meanwhile, Mims Davies, the UK’s Minister for Employment said that February’s figures will be quickly overtaken by ‘the worst public health emergency in our lifetimes’.
Furthermore, she reasuringly added that today’s report ‘serve[s] as an important reminder of the strong foundations we have built as we look to withstand the impact on the global economy’.
Sterling’s gains were compromised, however, after yesterday saw Prime Minister Boris Johnson express concern over the likelihood of a ‘second peak’ of coronavirus fatalities should the Government ease lockdown measures prematurely.
GBP/ZAR Forecast: Could Global Economic Volatility Further Compromise the South African Rand?
Pound (GBP) investors will be awaiting tomorrow’s release of the UK’s final inflation report for March. So, if this falls below forecasts, we could see Sterling shed some of its gains against the South African Rand.
Meanwhile, South Africa’s Government will remain in focus this week. If Cyril Ramaphosa proposes any new stimulus measures to bolster the economy. Therefore, we may see the South African Rand begin to claw back some of its losses.
Overall, the GBP/ZAR exchange rate is expected to strongly perform this week as the South African economy is continually plagued by falling oil prices and global market volatility. As a result, we will see many investors flock to safe-haven assets instead.
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