The Pound to South African Rand (GBP/ZAR) exchange rate rocketed higher last week as markets were rocked by a USD selloff and fresh coronavirus concerns.
What’s Been Happening: Rand Undermined by Souring Market Sentiment
The South Africa Rand got off to a healthy start last week, as widespread weakness in the US Dollar (USD) helped to bolster the appeal of emerging market currencies.
However, the Rand struggled to hold on to these gains as the week continued, with market sentiment beginning to sour in response to fresh coronavirus fears as well as the Federal Reserve’s dovish outlook for the second half of 2020.
This risk-off tone was then further reinforced by abysmal GDP readings from the US and Eurozone, which highlighted the depth of the current global recession.
Meanwhile, the Pound rallied last week, riding higher on the weakness of its peers and benefiting from some end-of-month flows.
Three Things to Watch Out for This Week
1. BoE Rate Decision
In the spotlight this week will be the Bank of England’s (BoE) latest rate decision. No policy changes are expected from the BoE this week, but could a dovish outlook for the rest of 2020 undermine the Pound?
2. UK PMIs
Also influencing Sterling this week will be UK’s latest PMI figures, with July’s finalised figures likely to offer support to GBP exchange rates as they confirm business activity rebounded sharply last month.
3. Fluctuating Market Risk Sentiment
In the absence of any notable domestic data, the Rand is likely to remain highly sensitive to market sentiment this week. This may infuse the emerging currency with fresh volatility amid coronavirus and US stimulus uncertainty.
Looking ahead, the GBP/ZAR exchange rate may trade in a wide range this week, in light of the BoE’s latest rate decision and ongoing coronavirus concerns.