The Pound to South African Rand (GBP/ZAR) exchange rate traded in a wide range last week, in response to shifting market sentiment.
What’s Been Happening: Rand Fluctuates amid Global Uncertainty
The Rand was met by considerable volatility last week, as the emerging market currency was rocked by fluctuating market sentiment.
This resulted in some sharp losses for the Rand at the start of the session as investors were spooked by a sudden slump in equity markets, which sent them flocking to the safe-haven US Dollar (USD).
But, ZAR exchange rates were able to rebound later in the week, aided by the news that South Africa had secured more coronavirus vaccine doses, as well as a pull back in the US Dollar.
At the same time, the Pound was bolstered by comments from Bank of England (BoE) Governor Andrew Bailey, in which he downplayed speculation the bank could slash interest rates below zero, after suggesting that ‘there are a lot of issues’ with negative rates.
However, limiting the upside potential of Sterling last week were concerns that the UK government could impose tougher lockdown measures amidst some alarming coronavirus statistics.
Three Things to Watch Out for This Week
1. Coronavirus Developments
Continuing to act as a key catalyst in the GBP/ZAR exchange rate this week will be coronavirus developments in both the UK and South Africa, with both currencies likely to face some hurdles due to high infection rates.
2. SARB Rate Decision
ZAR investors will undoubtedly be focused on the South African Reserve Bank’s (SARB) first policy meeting of 2021. While the majority of analysts expect the bank to leave its policy untouched there are a few who are predicting a rate cut, an outcome which would likely put significant pressure on the Rand.
3. UK PMI Figures
The publication of the UK’s latest PMI figures are expected to report economic activity contracted in January as a result of the national lockdown, something which is likely to weigh on Sterling at the end of the week,
Looking ahead, the GBP/ZAR exchange rate could face some fresh volatility this week as coronavirus developments likely continue to drive market sentiment.