The Pound South African Rand (GBP/ZAR) exchange rate strengthened over the last week as a decline in commodities prices weighed on the Rand.
What’s Been Happening: GBP/ZAR Strengthens amid Falling Commodities Prices
The South African Rand (ZAR) has struggled over the last week, with global commodities prices falling amid the property-sector crisis in China.
Gold and iron ore, two of South Africa’s most important exports, slumped by 3% and 9% over the past week, respectively.
In addition, South African retail sales contracted by 11.2% in July, versus the 0.3% contraction economists predicted, due to the civil unrest.
The Pound (GBP), meanwhile, found support early last week following positive employment data showing a robust recovery in the labour market from June through to August.
On Wednesday the UK’s CPI release showed that inflation hit a nine-year high of 3.2%, further boosting the GBP/ZAR exchange rate.
Sterling’s gains were potentially capped, however, by the UK’s worsening energy crisis, as well as an unexpected slump in UK retail sales on Friday.
At the start of this week, with the UK’s gas crisis rattling GBP investors and the commodities market recovering, GBP/ZAR has lost some of its gains.
Three Things to Watch Out for This Week
- Commodities Prices
Commodities prices will likely continue influencing the Rand. If they recover this week, ZAR exchange rates could climb.
- UK Energy Crisis
The business secretary Kwasi Kwarteng is hoping to strike a deal today to restart CO2 production. If the UK can successfully manage the energy crisis, GBP may firm.
- BoE Interest Rate Decision
With soaring inflation alongside signs of economic slowdown, the Bank of England (BoE) has a tough choice to make. Whatever they vote to do, it could have a big effect on Sterling.
This week brings a lot of uncertainty as GBP/ZAR could depend on both commodities prices and how the UK government handles the country’s gas crisis, while the BoE decision could also cause sharp movement. The Pound Rand pair may experience some volatility this week.