The Pound to South African Rand (GBP/ZAR) exchange rate has fallen to its worst levels since the start of the year, as a prevailing risk-on tone favours the Rand
What’s Been Happening: Rand Bolstered by Upbeat Mood
The Rand enjoyed some robust support through last week’s session, as the appeal of the emerging market currency was bolstered by the upbeat mood.
Market sentiment improved amidst the ramping up of vaccination programmes around the world, as well as US stimulus optimism.
Further lifting the Rand in the second half of the week were some upbeat domestic data releases, with both mining and manufacturing production printing above expectations in December.
Meanwhile, the Pound only registered modest losses against the Rand through the first half of the week as the currency was supported by positive headlines regarding the UK’s vaccination drive.
However, Sterling then fell sharply in the second half of the week after Bank of England (BoE) governor, Andrews Bailey warned that the UK could be cut off from accessing the EU’s financial markets.
While some stronger-than-expected GDP figures were welcomed by GBP investors at the end of the session, this failed to reverse the Pound’s losses.
Three Things to Watch Out for This Week
- UK PMIs
A key focus for GBP investors this week will be the publication of the UK’s latest PMI releases, which could put some significant pressure on the Pound at the end of the session, amidst forecasts for another contraction of economic activity in February.
- UK Inflation
Also driving Sterling this week will be the publication of the UK’s consumer price index, where a slowing of inflation in January could also dent GBP exchange rates.
- South African Inflation
The publication of South Africa’s own CPI figures meanwhile, could help to bolster the Rand, as economists forecast domestic inflation will have accelerated last month.
In addition to some notable data releases, the GBP/ZAR exchange rate is also likely to be influenced by global coronavirus developments. With the continued fall in cases and vaccination rollout likely to further bolster the appeal the risk-sensitive Rand.