The Pound South African Rand (GBP/ZAR) exchange rate is at a two-week high this morning, as the latter remains pressured by falling commodities prices and the economic fallout of last month’s violent unrest in South Africa.
What’s Been Happening: GBP/ZAR Climbs following BoE Decision
The South African Rand (ZAR) struggled over the last week, as the prices of gold and platinum – South Africa’s most valuable exports – dropped by 4% and 7%, respectively.
Also weighing on the Rand is the fallout from South Africa’s recent violence, during which over 330 people died and a huge amount of damage was done to businesses and infrastructure.
In a cabinet reshuffle, President Cyril Ramaphosa has appointed Enoch Godongwana, an economic policymaker for the government, as the new finance minister. Godongwana will have the challenging task of reviving South Africa’s economy.
Meanwhile, the Pound was subdued at the beginning of last week amid a lack of impactful data.
Sterling then climbed following the Bank of England’s (BoE) latest policy decision as the central bank struck a hawkish tone in its subsequent Monetary Policy Summary. The BoE said that ‘some modest tightening of monetary policy’ may be needed to control inflationary pressures in the near term, which boosted GBP.
Three Things to Watch Out for This Week
- Risk Sentiment
With global Covid cases on the rise and China imposing new restrictions to battle the Delta variant, a subdued appetite for risk may weigh on the risk-sensitive Rand.
- UK GDP
The Pound could strengthen further on Thursday as the UK’s GDP is expected to have grown by 4.8% over the second quarter of this year, recovering from the previous quarter’s 1.6% contraction.
- UK Employment Data
Next week’s employment data from the UK could also boost GBP, as both average earnings and the unemployment rate are forecast to improve.
The GBP/ZAR pair may fluctuate on risk appetite and commodities prices, but if the UK’s data releases meet the promising expectations then the Pound could ultimately gain.