The Pound South African Rand (GBP/ZAR) exchange rate is currently trading close to a two-week low, as a risk-on mood supports ZAR and a lack of impactful data leaves GBP adrift.
What’s Been Happening: GBP/ZAR Dips as the Rand Bounces Back
The South African Rand (ZAR) was initially on the defensive last week, as the economic damage from the recent unrest continued to weigh on the currency.
However, it started to pick up towards the end of the week, boosted by rising gold prices – South Africa’s top export – and an unexpected widening of the country’s trade surplus.
South Africa also downgraded its Covid alert level, easing restrictions in response to steadily declining cases.
The Rand then shot up to a near two-week high against the Pound (GBP) on Monday, despite a shock contraction in South Africa’s manufacturing PMI, as the emerging market currency was buoyed by a risk-on market mood.
Meanwhile, the Pound started strong against the Rand, as optimism in the UK’s route out of the pandemic and towards economic recovery underpinned GBP exchange rates.
However, Sterling slipped towards the end of last week as a lack of data left it open to losses.
The Pound then remained subdued as this week’s finalised manufacturing PMI came in as expected while also raising supply chain concerns.
Three Things to Watch Out for This Week
- Commodities Prices
With the South African economy linked to mineral exports, particularly platinum, iron and gold, rising commodities prices could boost ZAR.
- BoE Interest Rate Decision
Bank of England (BoE) policymakers have expressed different views in recent weeks, leading economists to have varied predictions for this month’s policy update. A dovish or hawkish tilt could stifle or support the Pound, respectively.
- Coronavirus News
If UK Covid cases keep falling, the Pound could strengthen. Meanwhile, South Africa’s recently eased restrictions could lead to a more optimistic outlook or another rise in cases.
GBP/ZAR Forecast
With BoE decision looming, the GBP/ZAR exchange rate could hinge on whether the central bank strikes a dovish or hawkish tone.