Pound South African Rand Weekly Forecast: GBP/ZAR Exchange Rate Retreats from Seven-Month High

The Pound South African Rand (GBP/ZAR) exchange rate hit a seven-month high last week as sliding commodities prices dragged on the Rand.

So far today the pair seems to be wavering, as precious metals rebound but coal and iron ore continue to fall.

What’s Been Happening: GBP/ZAR Climbs to Seven-Month High as Commodities Slide

The South African Rand (ZAR) slumped last week as tumbling materials prices hit the commodity-linked currency. Prices for gold, platinum, coal and iron ore – four of Africa’s top-five exports – fell by as much as 5%.

ZAR was also dented by an extension to scheduled power outages amid a shortage in generation capacity at its ageing, state-owned coal plants.

Political jitters added to the Rand’s headwinds at the end of the week as municipal elections loomed. After the deadly civil unrest in July, fraught political tensions weighed on ZAR.

Meanwhile, the Pound initially dropped against the Rand but regained ground as UK Covid cases fell and data from the Confederation of British Industry beat forecasts.

In the autumn budget, Chancellor Rishi Sunak unveiled £150bn of government spending amid an upbeat forecast from the Office for Budget Responsibility, providing the Pound with some support.

However, concerns over tax increases and rising Brexit tensions may have limited Sterling’s gains somewhat, though it was still able to hit a seven-month high against the weaker Rand.

Three Things to Watch Out for This Week

  1. South Africa Local Elections

The polls opened on Monday, so the results should be out early this week. Any political upsets could cause some volatility in the Rand.

  1. Commodities Prices

Precious metals are recovering so far this week but other commodities are still falling. If materials prices continue like this, the commodity-linked Rand could struggle.

  1. BoE Policy Decision

Traders expect the Bank of England (BoE) to hike rates this week but economists think it will wait until December at the earliest. A hawkish move could boost GBP while a delay to tightening could dent it.

GBP/ZAR Forecast

If commodities prices remain mixed then the Rand could struggle for direction this week. Meanwhile, the BoE decision could cause significant movement in GBP.

Samuel Birnie

Contact Samuel Birnie