The Pound to South African Rand (GBP/ZAR) exchange rate fell sharply last week as upbeat trade and some strong inflation figures catapulted the Rand higher.
Last Week: Rand Turbocharged by Strong Inflation Figures
The South African Rand roared higher last week after domestic CPI figures revealed a sharp jump in inflation in July.
With inflation rebounding into the South African Reserve Bank’s (SARB) target range, ZAR investors were optimistic that the SARB would be able to avoid more rate cuts this year.
This uptrend in the Rand was also aided by an improvement in market risk appetite last week. Largely brought on by a significant sell-off of the US Dollar (USD).
The Pound, meanwhile, sought to mount a comeback in the second half of the week in response to Downing Street’s rejection of rumours that Boris Johnson could step down as PM within six months.
However, Sterling’s gains proved short lived, with GBP/ZAR falling back after Bank of England (BoE) Governor Andrew Bailey struck a dovish tone in his key note speech at the Federal Reserve’s Jackson Hole summit.
Three Things to Watch out for This Week
1. Coronavirus Developments
As coronavirus cases around the global begin to spike again, we could see concerns over the potential economic impact of a second wave infuse some volatility into the GBP/ZAR exchange rate this week.
2. UK PMIs
For GBP investors the focus this week may be on the UK’s latest PMI releases, which may help to support the Pound if they confirm the private sector enjoyed a massive improvement in growth last month.
3. UK Redundancies
Sterling is also likely to grow increasingly sensitive to news regarding job losses in the UK, as the winding down of the government’s furlough scheme threatens to unleash a massive wave of unemployment.
Looking ahead, the GBP/ZAR exchange rate looks set to trade in a wide range through the remainder of this week as coronavirus worries and UK employment concerns look to drive markets.