The Pound South African Rand (GBP/ZAR) exchange rate fell sharply last week, with the pairing briefly striking a new one-year low.
What’s Been Happening: Pound South African Rand Slumps in Bullish Trade
The South African Rand shot higher against the Pound and the majority of its other peers last week as the emerging market currency was turbocharged by a prevailing risk-on mood.
This uptick in market risk appetite appeared to be supported by expectations that the US Federal Reserve will leave its accommodative monetary policy in place for some time.
The Rand was forced to relinquish some of these gains in the latter half of the week however, in response to a weaker-than-expected domestic PPI reading.
Meanwhile, the Pound was unable to put up much of a fight against the Rand at the start of last week as it was undermined by renewed Brexit tensions between the UK and EU over the Northern Ireland protocol.
However, Sterling rebounded in the second half of the week after Bank of England (BoE) policymaker Gertjan Vlieghe hinted the bank could start hiking interest rates from early 2022, so long as unemployment doesn’t shoot up once the furlough scheme ends.
Three Things to Watch Out for This Week
- UK Coronavirus Developments
GBP investors will continue to key a close eye on UK coronavirus headlines this week, as they look for more clarity on whether the government will go ahead with plans to reopen more of the economy later this month.
- UK PMI
Also influencing the Pound this week will be the UK’s latest PMI releases. Will activity in the UK’s service sector be revised higher last month, following the latest easing of restrictions on 17 May.
- South African Unemployment Figures
For ZAR investors the primary focus this week will be South Africa’s latest unemployment figures, which look set to limit the upside in the Rand throughout the session after confirming another rise in the jobless rate in the first quarter.
Pound South African Rand Forecast
Looking ahead, the Pound South African Rand exchange rate may trade in a wide range this week as UK coronavirus developments are likely to infuse volatility into the pairing.