Pound South African Rand Weekly Forecast: GBP/ZAR Exchange Rate to Hit New Highs?

The Pound South African Rand (GBP/ZAR) exchange rate hit an eight-month high last week as the emerging-market Rand faced multiple headwinds. 

What’s Been Happening: GBP/ZAR Hits Eight-Month High as Rand Tumbles 

The South African Rand (ZAR) tumbled early last week as the US Dollar (USD) index rose by 0.5%, hitting a 16-month high. This strength in USD weighed heavily on emerging-market currencies, including the Rand. 

When the South African Reserve Bank (SARB) surprised markets by raising its repo rate, this failed to give the Rand much support. The decision indicated a slower tightening cycle, meaning it was a dovish move in the long term. 

Finally, the Rand was caught up in an emerging-market contagion after Turkey’s central bank cut its interest rate by 100 basis points. The Turkish Lira (TRY) tumbled and the Rand was dragged down with it to an eight-month low against the Pound. 

Meanwhile, the Pound firmed as traders started pricing in a rate rise at the Bank of England’s (BoE) policy meeting next month. 

Strong post-furlough employment data initially boosted rate hike bets, followed by the UK’s inflation rate, which exceeded expectations to hit a ten-year high of 4.2%. 

GBP/ZAR has held near its eight-month high so far this week as a strong US Dollar keeps pressure on the Rand following Jerome Powell’s renomination as Chair of the Federal Reserve. 

Three Things to Watch Out for This Week 

  1. BoE Speeches 

A number of BoE speakers, including Governor Andrew Bailey, could boost Sterling if they hint at a rate hike next month. 

  1. FOMC Minutes 

As the Rand is particularly sensitive to bets for a Fed rate rise, the latest meeting minutes from the Federal Open Market Committee (FOMC) may cause significant movement. 

  1. SA Business Confidence 

Business morale in South Africa is expected to stay the same for the fourth quarter of this year. Any unexpected results could affect GBP/ZAR. 

GBP/ZAR Forecast 

It’s possible that GBP/ZAR could hold near its eight-month highs this week, while hawkishness from the Fed could see the pair climb even further. 

Samuel Birnie

Contact Samuel Birnie