The Pound to South African Rand (GBP/ZAR) exchange rate is currently trading at a four-month high, after rallying last week in response to UK economic optimism.
What’s Been Happening: Pound Lifted by Budget Announcement
The Pound rallied against the South African Rand last week, primarily as Chancellor Rishi Sunak’s 2021 Budget helped to boost expectations for the UK’s economic recovery.
Despite some concerns over future tax hikes, the response to the Chancellor’s Budget statement was largely positive as Sunak pledged to do ‘whatever it takes’ to support the UK’s economic recovery, as he unvieled a more generous-than-expected Budget.
Meanwhile, the Rand spent most of last week on the back foot, in response to a prevailing risk-off mood, which left investors wary of the emerging market currency.
The dent in market risk appetite was mostly driven by the surge in US Treasury yields, which bolstered demand for the US Dollar (USD) at the expense of most other currencies.
Three Things to Watch Out for This Week
- South African GDP
The spotlight at the start of this week will be on South Africa’s latest quarterly GDP reading. Economists are forecasting another expansion of growth in the latest quarter of 2020, but will restrictions in place at the end of the year result in an underwhelming reading?
- South African Business Confidence
Also of note to ZAR investors this week will be South Africa’s latest business confidence release, where another improvement in sentiment in the first quarter of 2021 could lend some support to the Rand later in the session.
- UK GDP
The publication of the UK’s own GDP figures will be the key focus for GBP investors this week. January’s monthly release is expected to report a sharp contraction as a result of the latest lockdown, potentially putting pressure on the Pound in the process.
Looking ahead, we could see the GBP/ZAR exchange rate extend its rally, assuming that market risk appetite remains weak in the face of a persistent rise in US yields.