The Pound to South African Rand (GBP/ZAR) exchange rate traded erratically last week as the pairing was rocked by fresh political risks in South Africa.
Last Week: Rand Rocked by Leadership Challenge against Ramaphosa
The South African Rand initially fell off a cliff last week, as President Cyril Ramaphosa faced down a leadership challenge from a faction within his ANC party.
However ZAR exchange rates were quick to bounce back after this initial sell-off, with a tumble in the US Dollar (USD) and stronger-than-expected domestic PMI figures both reflecting well on the Rand.
The Rand then extended this upside through the second half of the week, buoyed by the lure of higher yields.
The Pound, meanwhile, got off to a strong start last week on the back of upbeat trade, but quickly started to give ground in response to fresh Brexit jitters and some dovish commentary from Bank of England (BoE) policy makers.
Adding to the pressure on Sterling were some weaker-than-expected PMI releases, which highlighted the accelerating pace of job cuts in the UK.
Three Things to Watch out for This Week
- South Africa GDP
Top of the agenda this week will be South Africa’s second quarter GDP release. Economists are forecasting a colossal contraction of over 40%, which is likely to put significant pressure on the Rand.
- Brexit Headlines
Brexit is back in the spotlight this week and is likely to act as a key catalyst of movement for the Pound as the latest round of UK-EU trade talks get underway as tensions between the two sides flare.
- UK Monthly GDP
Also influencing GBP exchange rates this week will be the UK’s latest month GDP release. This could help to offset some Brexit gloom if economic growth continued to surge in July.
Looking ahead, the GBP/ZAR exchange rate is likely to continue to fluctuate through this week’s session as gloomy GDP figures from South Africa and revived Brexit jitters look to infuse fresh volatility into the pairing.