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Riku Tanaka
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Forex
April 17 22:20

GBP/ZAR rate spikes as UK legislators extend lockdown measures

GBP/ZAR conversion rate jumped up by about 0.5% on Apr 17. This left the pair exchanging at around 23.4030 rand.
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A heightened appetite for risk supported the sterling at the earlier today (Apr 17), following information that success has been achieved in a recent preliminary coronavirus medication trial as well as the announcement of plans to re-open up the US economy.
However, news of successful COVID-19 treatment trial didn’t bolster the rand, which remained under stress after an unexpected interest rate cut. The news did manage to counterbalance low numbers in the financial data released by China, which indicated that the world’s second-largest economy had contracted to record lows dating back to 1992.
Moh Siong Sim, the currency analyst at the Bank of Singapore noted “It's this isolated inclination between needing to stress over the financial freeze and the expectation that things may be re-beginning soon. We're stuck in that limbo zone, however it seems that the disease rate may have hit a top at a worldwide level [… ] and in the event that we discover a fix, at that point there's a remedy for the economy too.”
On top of all this, the UK legislative body reported it would prolong the current lockdown measures for a minimum of three additional weeks. This bolstered the pound, and sent it on an ascending trajectory against the Rand.
On the other side of the pond, US President Donald Trump declared that his administration was planning to re-open the nation’s economy, which further boosted risk-taking among investors.
On Thursday (Apr 16), Trump detailed the manner in which US state governors would lift the current lockdowns in a three-stage approach. The strategy will be contingent upon scrupulous testing procedures as well as individual states’ discretion.
Addressing reporters on Thursday (Apr 16), the President Trump stated, “We are not opening all at once, but one careful step at a time.”
Be that as it may, while this helped boost investor risk-taking and propelled the rand, investors were still cautious after the US data release which showed that over 20 million Americans were unemployed.
Aside from this South Africa’s expectation of an government stimulus declaration helped to curtail damage to the nation’s currency. Investor kept their optimism during Friday's (Apr 17) session and as per Investec, “The Rand is already trading in deeply oversold territory and selling the up-ticks will still be favored if one believes that the dollar is also due an extended slide.”
Looking forward, the COVID-19 crisis is probably going to remain as the principle driver of the Pound to South African Rand (GBP/ZAR) exchange rate.
Risk appetite is likely to continue gaining momentum next week as additional data is unveiled about the COVID-19 treatment trial.
In the event that rand traders disregard prior concerns that were instilled by the unexpected interest rate cut, the South African currency could finish higher against the sterling in next week’s sessions.