The Pound South African Rand (GBP/ZAR) exchange rate hit a one-month high yesterday, as prospects of a Bank of England (BoE) rate hike in early 2022 gave Sterling a boost.
What’s Been Happening: GBP/ZAR Jumps on BoE Rate Hike Hints
The South African Rand (ZAR) initially gained on a struggling Pound (GBP) last week, but a dip in mineral commodities prices capped its gains before pressuring ZAR to the downside.
The fall in materials prices came amid the debt crisis at Chinese property giant Evergrande, as well as signs of a general slowdown in the Chinese economy.
In addition, surging oil prices also weighed on the Rand, as South Africa is an oil-importing economy.
Meanwhile, the Pound faced challenges last week as fears over the UK’s energy crisis sapped GBP demand.
A hawkish tilt from the Bank of England (BoE) on Thursday then gave GBP a significant boost, with traders bringing forward their forecasts for a rate hike to as early as March 2022.
BoE Governor Andrew Bailey kept the tailwind alive in a speech on Monday by suggesting a rate hike could come before tapering.
However, GBP’s gains were limited somewhat by the UK’s ongoing supply chain crisis, which has recently contributed to fuel outages.
Three Things to Watch Out for This Week
- UK Supply Chain Crisis
The supply chain crisis has weighed on the Pound recently. Any new developments will likely have a significant impact on GBP exchange rates.
- South Africa Balance of Trade
South Africa’s trade surplus is expected to have widened in August, which could bolster the Rand after last month’s miss.
- South Africa Manufacturing PMI
After rebounding in August, South Africa’s ABSA manufacturing PMI is projected to improve again this month. Such a result could support ZAR.
With rate hike expectations still supporting the Pound, GBP/ZAR may hold strong this week. However, if the UK’s supply chain crisis worsens, and if the South African data prints positive, then the Rand could regain ground as we near the weekend.