Pound to South African Rand (GBP/ZAR) Exchange Rate Heads Higher Despite Growing Concerns for UK Economy

GBP/ZAR Exchange Rate as UK PMIs Swing into Decline in December

The Pound to South African Rand (GBP/ZAR) exchange rate rose by 0.2% today, with the pairing currently trading around R20.45.

Sterling fell against many of its peers today but managed to remain slightly higher against the South African Rand.

However, UK economic recovery is looking increasingly dim, with the final December PMIs revealing a slightly weaker outlook for the economy going forward.

Today saw the release of the final UK Services PMI, which fell below forecasts to 49.4.

Tim Moore, the Economics Director at IHS Markit, was downbeat in his analysis, saying:

‘December data confirm that the UK service sector has swung back into decline after the partial rebound seen during the third quarter of 2020, largely reflecting tighter restrictions on consumer services amid the worsening trajectory of the pandemic.’

Meanwhile, Duncan Brock, the Group Director at the Chartered Institute of Procurement and Supply, said:

‘The top line PMI figure belies the fact that the services sector is in a dark place with more hardships expected in the first quarter of 2021.’

UK markets have also become more jittery after the UK entered another Covid-19 lockdown.

Prime Minister Boris Johnson has also dampened UK market mood by saying that there would be lots of ‘caveats’ for the lockdown to be eased in the coming months.

South African Rand (ZAR) Dips as Outlook for South African Economy Grows Darker on New Covid-19 Variant Fears

The South African Rand (ZAR) has risen slightly from yesterday’s lows after the World Bank has predicted a rebound in the South African economy for 2021.

The World Bank’s report, however, also said:

‘With economic activity in South Africa already on a weak footing before the pandemic hit, output is expected to have fallen 7.8 percent last year. The country suffered the most severe COVID-19 outbreak in Sub-Saharan Africa, which prompted strict lockdown measures and brought the economy to a standstill.’

Added to this, South Africa’s economic outlook remains largely uncertain, with the new strain of Covid-19 in the nation threatening to derail the nation’s economic recovery.

Demand for the risk-sensitive ZAR, however, is picking up on hopes that the US stimulus package could receive a boost if the Democrats secure the upper chamber.

GBP/ZAR Outlook: Could Improving Risk Sentiment Boost the South African Rand?

Pound (GBP) traders will continue to monitor Britain’s coronavirus developments this week.

If it looks increasingly likely that the UK nationwide lockdown could be extended beyond mid-February, then the GBP/ZAR exchange rate would fall.

The South African Rand (ZAR) will likely continue to struggle, however, as the outlook for South Africa’s economy becomes increasingly dark as the new coronavirus strain worries SA markets.

However, ZAR could receive a boost if the outlook for the US economy improves with hopes of a stimulus package.

As a result, demand for the risk-sensitive ZAR could head higher towards the end of the week.