Pound South African Rand (GBP/ZAR) Exchange Rate Rises as Rand Receives Moody’s Downgrade

March 30, 2020 – Written by John Cameron

GBP/ZAR Exchange Rate Edges Higher as Risk-Off Markets Weaken Rand

The Pound South African Rand (GBP/ZAR) exchange rate rose by 0.7% today after the credit ratings firm Moody’s downgraded the South African currency to ‘junk’ status. The pairing is currently trading around R22.075.

Bianca Botes, a treasury partner at Peregrine Treasury Solutions, commented:

‘The decision by Moody’s could not have come at a worse time. South Africa, like many other countries, is seized with containing the outbreak of the coronavirus (Covid-19).

‘The impact of Covid-19 is felt across various sectors of the economy including the financial markets which experienced a significant sell-off in equities, bonds and exchange rates as investors retreated to safe-haven securities amid the uncertainty.’

The South African Rand (ZAR) is also suffering from a slump in market risk appetite as investors prepare for another week of coronavirus-led volatility.

After South Africa register 1,280 cases of those infected with the coronavirus, investors have remained wary of the emerging market currency. Consequently, the ZAR has traded negatively against many of its peers today.

GBP/ZAR Exchange Rate Rises as UK Coronavirus Shows ‘Early Signs of Slowing’

The Pound (GBP) has benefited from news that the UK’s coronavirus cases could be showing ‘early signs of slowing’, according to the epidemiologist Prof Neil Ferguson and advisor to the British government.

In an interview for BBC Radio 4, Mr Ferguson commented:

‘In the UK, we can see some early signs of slowing in some indicators. Less so in deaths because deaths are lagged by long time from when the measures come into force.

‘It’s not yet plateaued as the numbers are increasing each day but the rate of that increase has slowed.’

Sterling investors will be awaiting this evening’s release of March’s UK GfK confidence report. However, with a forecasted fall of -14, we could see the Pound lose some of its gains as Britain’s economic outlook continues to darken due to the coronavirus crisis.

After the credit ratings agency, Fitch, downgraded the UK’s sovereign debt the Pound looks set to remain volatility during the week as the nationwide ‘lockdown’ continues to plague the British economy.

GBP/ZAR Outlook: Could Sterling Sink on a Weak Q4 Growth Report?

Sterling traders will be looking ahead to tomorrow’s release of the UK growth report for the fourth quarter.

Any signs of deterioration in the British economy prior to the outbreak of the coronavirus would further darken the UK’s economic outlook and weaken the GBP/ZAR exchange rate.

The South African Rand (ZAR) will continue to remain volatile as investors seek out safe-haven currencies like the US Dollar and Swiss Franc amid growing concerns over the Covid-19 pandemic.

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TAGS: Pound Rand Forecasts South African Rand Forecasts