Pound South African Rand Weekly Forecast: GBP/ZAR Exchange Rate Stumbles as Commodities Climb

The Pound South African Rand (GBP/ZAR) exchange rate lost ground last week as a risk-on market mood and rising commodities prices underpinned the South African Rand (ZAR).

What’s Been Happening: GBP/ZAR Falls on Risk Appetite and Rising Commodities

The Rand climbed steadily against the Pound (GBP) last week, as rising commodities prices and an increasingly risk-positive trading environment supported the emerging-market currency.

Positive data also buoyed ZAR. Manufacturing and gold production printed above forecasts, while retail sales unexpectedly expanded by 4.9% in August.

However, the Rand relinquished some of its gains on Monday following a slowdown in China’s GDP growth. As China is the main buyer of South African exports, this negative data dented ZAR.

Meanwhile, the Pound initially struggled last week amid a fall in UK consumer confidence and a decline in business output.

GBP/ZAR held steady on Thursday as Brexit optimism and expectations of a Bank of England (BoE) rate hike supported Sterling. However, the Pound fell again on Friday, but these tailwinds limited its losses.

The Pound managed to firm against a weakening Rand on Monday, although it lost gains as gas prices started surging again. Hopes that Russia would increase gas supplies to Europe faded, sending prices higher and reigniting the UK’s energy fears.

Three Things to Watch Out for This Week

  1. Inflation Rates

Both the UK and South African inflation rates are out on Wednesday, and any higher-than-expected readings could boost the respective currencies.

  1. UK Retail Sales

The Pound may find support on Friday if UK retail sales for September grow by 0.5%, as expected. But will the report miss forecasts as it did in August?

  1. Commodities Prices

As a commodity-linked currency, the Rand is strongly affected by the prices of raw materials. If commodity prices continue to climb, so could the Rand.

GBP/ZAR Forecast

UK inflation will be in the spotlight for GBP investors. If inflation overshoots, it could significantly support the Pound. Meanwhile, commodities prices and risk appetite could cause some volatility in the pair in the coming week.

Samuel Birnie

Contact Samuel Birnie