The Pound to South African Rand exchange rate shot higher last week, after a gloomy Federal Reserve prompted market optimism to plummet.
What’s Been Happening: Rand Undermind by Dovish Fed Forecasts
The South African Rand began last week on some solid footing, with the emerging market currency continuing to trend higher on the back of improving investor sentiment.
However the positive market mood soured in the latter half of the session, following the Federal Reserve’s latest policy meeting.
This saw the Fed warn the US economy has a ‘long road to recovery’, which alongside concerns over a coronavirus resurgence, put a dampener on hopes for a swift global recovery this year.
Meanwhile, the Pound’s gains against the Rand were tempered last week amidst ongoing concerns over Brexit and the UK government’s handling of the coronavirus crisis, with a record slump in GDP in April also limiting the upside in Sterling.
Three Things to Watch Out for This Week
1. BoE Rate Decision
Acting as the main catalyst of movement in the Pound this week is likely to be the Bank of England’s (BoE) latest rate decision. The BoE is widely expected to expand its stimulus programme this week, but will the bank have anything more to say on the possibility of negative interest rates?
2. UK Retail Sales
Also influencing GBP exchange rates this week will be the publication of the UK’s latest retail sales figures, with an expected rebound in sales growth in May potentially boosting Sterling sentiment.
3. Second Wave Fears
With South African data thin on the ground this week, the Rand is likely to remain highly sensitive to market sentiment, likely leading to some weakness if concerns over a second wave of coronavirus infections continue to propagate.
GBP/ZAR Forecast
Looking ahead, the GBP/ZAR exchange rate looks to face further volatility this week as the latest BoE rate decision and threat of a coronavirus resurgence keeps investors on their toes.