GBP/ZAR Exchange Rate Continued Volatility

January 28, 2021 – Written by James Fuller

Demand for both the Pound and South African Rand continues to leave the British Pound to South African Rand (GBP/ZAR) exchange rate’s movements volatile. The Pound is attempting to benefit from weakness in rival currencies, but the market’s mood continues to slightly benefit the South African Rand as well. Overall, uncertainty remains a key factor in the pair, and coronavirus developments will continue to dominate the direction of movement.

Since opening this week at the level of 20.71, GBP/ZAR has been trending with an upside bias. While the pair has been struggling to sustain its gains, it has touched on highs multiple times in the past few days.

This morning, GBP/ZAR touched on a high of 20.97. This was the best level for GBP/ZAR in about half a month, since early January. However, GBP/ZAR has since tumbled from those highs again.

At the time of writing on Thursday afternoon, GBP/ZAR was trending in the region of 20.81 as it struggles to hold its advance attempts.

GBP Exchange Rates Remain Appealing despite UK Coronavirus Fears

Britain’s coronavirus situation remains dire. UK infection rates remain high, and this week saw the total death count pass the sobering figure of 100,000.

However, despite this the Pound remains appealing against many major rivals this week. Investors are buying the Pound largely due to expectations that Britain’s coronavirus vaccine rollout has progressed further than those of other major economies.

Amid expectations that UK vaccinations will continue to rise, Sterling remains generally appealing.

Some analysts believe that markets are too optimistic amid Britain’s gloomy overall coronavirus outlook. Today’s fears that UK could lose some vaccines to the EU appeared to be limited and have not much impact on the Pound either.

According to Analysts at ING, markets continue to find the Pound more appealing than major rivals, despite these concerns:

‘The political jitters between the EU, AstraZeneca and the UK don’t appear to have a negative impact on GBP. We look for further EUR/GBP decline over the course of the year as the UK vaccination advantage (and its likely earlier recovery) and GBP undervaluation vs EUR are to benefit Sterling’

Reports that the UK coronavirus infection rate is showing some more signs of abating in the current lockdown are also keeping the Pound buoyed against rivals.

ZAR Exchange Rates Volatile but Upside Potential Lingers

Investors are hesitant to buy the South African Rand today, as markets head away from assets correlated with risk and back into safer investments.

The South African Rand is a currency often correlated to risk and emerging market sentiment. With global markets becoming more anxious about the global coronavirus outlook and mixed recovery hopes, the Rand has fallen out of favour for now.

The Rand’s appeal has been further limited by concerns over South Africa’s own coronavirus outlook. South Africa’s infection rate remains high, and the nation has yet to procure its first vaccinations.

Still, despite these factors GBP/ZAR is not holding its best levels. The resilience that kept the Rand from falling against Sterling earlier in the week is persisting as well.

Analysts are optimistic that the underlying market sentiment is positive, which could cause sentiment to improve once this current wave of panic calms. According to Mark Haefele, Chief Investment Officer at UBS Global Wealth Management:

‘After a rally of this magnitude, and with stocks close to record highs, it is understandable that near-term uncertainty is leading to an increase in volatility. In our view, however, attention will likely shift back to earnings, stimulus, and the vaccine rollout,’

GBP/ZAR Exchange Rate Forecast: Calmer Markets Could Help Rand Recovery

The Pound is benefitting from the brief panic seen in markets this week. However, the current movement may be limited.

If investors become more aware of Britain’s gloomy coronavirus outlook, markets may be less willing to keep buying the Pound.

Sterling is gaining on UK vaccine hopes, but if Britain’s infection rate remains high the Pound will only be able to hold its ground for so long.

On top of this, if market risk-aversion calms in the coming sessions, the South African Rand has a lot of potential to gain.

Vaccination hopes have made riskier currencies more appealing lately. If South Africa’s own coronavirus outlook was better, investors would have even more reason to buy the Rand.

As a result, any signs of coronavirus vaccine progress in South Africa could lead to a boost in demand for the Rand.

Coronavirus developments are likely to be the focus for the Pound to South African Rand exchange rate, over tomorrow’s South African data such as business and trade stats.

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