The Pound South African Rand (GBP/ZAR) exchange rate fell sharply last week, as a dovish Federal Reserve helped to bolster demand for higher risk currencies.
What’s Been Happening: Pound South African Rand Slips in Risk-On Trade
The South African Rand initially got off to a poor start last week, being undermined by load-shedding by state utility Eskom, with additional pressure coming from broad USD strength as well as vaccine concerns.
However, ZAR exchange rates then shot higher in the wake of the Federal Reserve’s latest policy meeting, as the US central bank struck a more dovish tone than expected, leading to a sharp drop in the US Dollar and boosting market risk appetite.
Meanwhile, the EU’s suspension of the AstraZeneca vaccine limited the upside potential in the Pound at the start of last week.
Sterling faced more notable pressure through the latter half of the week however, with the Pound South African exchange rate slumping as traders were disappointed that the Bank of England (BoE) wasn’t more hawkish in its forward guidance, while a warning from the NHS about a shortage of vaccines next month further rattled GBP investors.
Three Things to Watch Out for This Week
- Coronavirus Headlines
In light of Europe’s coronavirus resurgence and a spat between the UK and EU over vaccine exports, it’s likely the Pound South African Rand exchange rate could be highly sensitive to Covid developments this week.
- UK Data
Also influencing Sterling this week will be a glut of high-impact UK data releases, with inflation, PMI and retail sales figures all scheduled for publication.
- SARB Rate Decision
For ZAR investors the primary focus for SAR investors this week will be on the SARB’s latest rate decision. No policy changes are expected this month but will an upbeat outlook from the bank help to support the Rand?
Pound South African Rand Forecast
Looking ahead, we could see the GBP/ZAR exchange rate infused with fresh volatility this week, amidst a slew of high-profile data releases and a renewed focus on coronavirus headlines.