The Pound South African Rand (GBP/ZAR) exchange rate stumbled to a three-week low last week as a risk-on mood benefited emerging market currencies like the Rand.
What’s Been Happening: Rand Bolstered by Risk-On Trade and Upbeat GDP
The South African Rand rallied last week, with the high-risk currency firming as an upbeat market mood prevailed amidst a pullback in US Treasury yields.
Reinforcing the Rand’s rally last week was also the publication of South Africa’s latest GDP figures, which printed above expectations with a 6.3% expansion of growth in the last quarter of 2020.
Meanwhile, the Pound struggled to hold its ground against the Rand last week, as Boris Johnson warned that his roadmap for easing lockdown could be subject to change as schools began to reopen.
The slump in the GBP/ZAR exchange rate then accelerated at the end of the week after investors were unnerved by the UK’s latest trade figures as they revealed trade with the EU plunged 40% in the first month under the new Brexit trade deal.
Three Things to Watch Out for This Week
- BoE Rate Decision
The spotlight this week will no doubt be on the Bank of England’s (BoE) latest rate decision. No policy changes are expected from the bank this month, but the BoE could still offer some support to the Pound if policymakers are upbeat about the UK’s economic outlook.
- South African Retail Sales
The focus for ZAR investors will be on South Africa’s latest retail sales figures, with the Rand likely to strengthen if sales growth rebounded as expected in January.
- Risk Sentiment
Also continuing to influence the GBP/ZAR exchange rate this week will be market risk appetite, could a sustained rise in the US Dollar and coronavirus concerns dampen the appeal of the Rand?
Pound South African Rand Forecast
Looking ahead, we could see the GBP/ZAR exchange rate mount a recovery later this week if the BoE is able to bolster confidence in the UK’s economic recovery.