The Pound South African Rand (GBP/ZAR) exchange rate slumped to a three-month low last week, as Sterling succumbed to some profit taking.
What’s Been Happening: Pound South African Rand Plunges despite Reopening Optimism
The Pound opened last week’s session on stable footing against the South African Rand, as GBP investors welcomed the confirmation from Boris Johnson that a large part of the UK economy would be allowed to reopen on 12 April.
However, this quickly gave way to some profit taking, which alongside concerns about potential delays to the UK’s vaccination drive sapped Sterling strength.
The slump in the Pound was then compounded by the eruption of violence in Northern Ireland as a result of lingering Brexit tensions.
The Rand, meanwhile, garnered some notable support due to the appreciation of commodity prices, with industrial metals reaching near record highs.
These gains were bolstered by a broad selloff of the US Dollar (USD) following some dovish comments from the Federal Reserve, which underpinned demand for the emerging market currency.
Three Things to Watch Out for This Week
- UK Reopening
The Pound South African Rand exchange rate may rebound this week as the reopening of non-essential retail in the UK looks to cheer Sterling sentiment.
- UK-EU Talks
Also influencing Sterling will be ongoing talks between the UK and EU regarding the Northern Ireland Protocol, tensions over which prompted last week’s wave of violence in the country.
- South African Retail Sales
For ZAR investors the main focus this week will be on South Africa’s latest retail sales figures, in which another contraction of sales growth in February is likely to weigh on the Rand.
Pound South African Rand Forecast
Looking ahead, we may see the Pound South African Rand exchange rate mount a tentative recovery this week as the UK’s reopening bolsters hopes for the country’s economic recovery this year.