Pound South African Rand Slumps to Two-Week Low Ahead of Expected SARB Rate Hike

The Pound South African Rand (GBP/ZAR) exchange rate slumped through last week’s session as the Rand was bolstered by expectations the South African Reserve Bank (SARB) will hike interest rates later this week.

What’s Been Happening: Pound South African Rand Tumbles on SARB Rate Hike Speculation

The South African Rand (ZAR) enjoyed notable support last week, with the currency being underpinned by expectations the SARB will raise interest rates to 4% at its first policy meeting of 2022.

This speculation was supported by the publication of South Africa’s consumer price index, as it reported a larger-than-expected jump in domestic inflation last month.

The Pound, meanwhile, was rocked by some mixed data releases last week, with Sterling initially stumbling as an underwhelming wage growth reading stoked concerns of an impending cost-of-living crisis in the UK.

GBP exchange rates began to recoup some losses in midweek trade, bolstered by a CPI reading showing UK inflation rocketed to a 30-year high, as well as the announcement that most Covid restrictions in England will be lifted this week.

However the Pound then fell dramatically at the end of the session, in response to an abysmal retail sales print and fresh UK political jitters.

Three Things to Watch Out for This Week

  1. SARB Interest Rate Decision

The spotlight this week will be on the SARB interest rate decision. Will a rate hike from the bank propel the Rand higher or is it already been fully priced in by markets?

  1. Geopolitical Uncertainty

Potentially limiting the upside potential in ZAR exchange rates this week will be ongoing geopolitical uncertainty. Fears over a conflict in Ukraine may act as a key headwind for the Rand.

  1. UK Politics

For GBP investors the focus this week will be on UK politics, with pressure on Boris Johnson growing as the ‘partygate’ scandal continues to dominate headlines.  

Pound South African Rand Forecast

The Pound South African Rand exchange rate could be infused with some notable volatility this week in the face of significant market jitters and UK political uncertainty.

Matthew Andrews

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