The Pound South African Rand (GBP/ZAR) exchange rate rose to a one-month high last week amid UK Omicron optimism and worries about the pressures facing emerging market economies in 2022.
This week the pair has experienced some sharp movements, slumping yesterday and bouncing back today, as Covid continues to infuse the market with volatility.
What’s Been Happening: GBP/ZAR Hits One-Month High
The South African Rand (ZAR) fell sharply against the Pound (GBP) last week, despite an upbeat market mood.
Experts are concerned about the resilience of emerging market economies, such as South Africa, heading into 2022. Pandemic-era debts and an interest rate rise from the Federal Reserve could stifle South Africa’s economic recovery.
Meanwhile, the Pound rose throughout the week as the UK government held back from introducing new Covid measures.
Sterling was also boosted by news that between 25% and 30% of Covid hospitalisations are ‘incidental cases’, meaning these patients are being treated primarily for something other than Covid.
While GBP/ZAR continued to firm, its gains were limited towards the end of the week amid worries about NHS staff absences and a shortage of lateral flow tests.
Three Things to Watch Out for This Week
- Omicron News
Markets are currently optimistic about the latest Omicron data. A risk-on mood could support the Rand while the Pound could firm if the UK avoids more Covid measures.
- South Africa PMIs
South Africa’s IHS Markit PMI and ABSA manufacturing PMI are both out on Wednesday. Drops in business activity could weigh on the Rand.
- UK Final Services PMI
The UK’s finalised services PMI could prompt some movement in the Pound, particularly if it differs from the flash estimate.
GBP/ZAR Forecast
With Omicron uncertainty still muddying the waters, GBP/ZAR could experience more volatility as the week goes on.