The Pound South African Rand (GBP/ZAR) exchange rate hit a three-week high today, as a souring market sentiment weighed on the risk-sensitive Rand and UK employment data beat expectations.
What’s Been Happening: GBP/ZAR Recovers as Market Sentiment Sours
The South African Rand (ZAR) was able to gain in the middle of last week, boosted by the rising prices of platinum and gold, which are two of South Africa’s key mineral exports.
The Rand was also supported by the SACCI business confidence figures for June and July, with both months printing higher than forecast.
However, Covid concerns and a waning appetite for risk began to weigh on the emerging-market currency towards the end of last week, seeing it slip to a three-week low against the Pound this week.
Meanwhile, a lack of UK left the Pound vulnerable to the Rand’s recovery.
Sterling was able to regain some ground as the week closed, despite some mixed data. While some reports missed expectations, a 4.8% surge in UK GDP growth for the second quarter of 2021 was enough to support GBP/ZAR.
Three Things to Watch Out for This Week
- UK CPI
After the Bank of England (BoE) hinted at tightening monetary policy earlier this month, the UK’s latest inflation rate reading will be in the spotlight for GBP investors. If it overshoots, GBP/ZAR could jump.
- South Africa Retail Sales
The Rand could find some support from South Africa’s latest retail sales figures, as sales are expected to have increased 4.5% month-on-month in June.
- UK Services PMI
The flash PMI for the UK services sector could drive significant movement in the Pound. At the time of writing there are no forecasts for the figure. Will the relaxation of isolation rules alleviate the effects of the ‘pingdemic’?
The UK inflation rate could dominate the week, as an overshoot in inflation will lead investors to speculate about the BoE’s tapering programme. Meanwhile, ZAR will likely be influenced by both its own data releases and global risk sentiment.