The Pound South African Rand (GBP/ZAR) exchange rate struck higher last week as souring market sentiment weighed heavily on the Rand.
What’s Been Happening: Pound South African Rand Strengthens in Risk-Off Trade
The South African Rand was placed on the defensive last week as a prevailing risk-off mood saw investors shun the emerging market currency.
This was initially triggered by the collapse of the Turkish Lira, which prompted a wider emerging market sell-off. Reinforcing the skittish mood were concerns over Europe’s coronavirus resurgence as well as a rise in tensions between the West and China.
However, the Rand was able to temper its losses in the second half of the week in the wake of the South African Reserve Bank’s (SARB) latest policy meeting, in which it left interest rates on hold, and revised its 2021 growth forecasts higher.
At the same time, the Pound struggled to capitalise on the Rand’s weakness in the first half of last week, as a spat between the UK and EU over vaccine exports spooked GBP investors.
Sterling then faced some volatility in mid-week trade on the back of some mixed data, with UK employment and PMI releases printing above expectations, but being undermined by some disappointing inflation figures.
But the Pound then roared higher in the latter half of the week after the EU opted not to impose strict restrictions on vaccine exports.
Three Things to Watch Out for This Week
- Coronavirus Headlines
The Pound South African Rand exchange rate is likely to remain sensitive to coronavirus developments this week, with investors particularly focused on whether Europe’s third wave will begin to wash up on the shores of the UK.
- UK GDP
Also in focus for GBP investors will be the UK’s latest GDP figures, with confirmation the UK economy expanded at a healthy pace at the end of 2020 potentially offering some support to Sterling.
- South African Trade Figures
For ZAR investors the spotlight this week will be on South Africa’s trade figures. Will an expansion of the nation’s trade surplus bolster the Rand?
Pound South African Rand Forecast
Looking ahead, we may see the Pound South African Rand exchange rate infused with fresh volatility this week, as coronavirus headlines continue to drive the pairing.