The Pound South African Rand (GBP/ZAR) exchange rate retreated last week, as a prevailing risk-on mood bolstered demand for the emerging market rand.
What’s Been Happening: Pound South African Rand Undermined by Bullish Trading Environment
After initially opening the week on the defensive as state utility Eskom announced it would need to reimplement scheduled power cuts, the South African Rand was quick to find its feet amid a bullish market mood.
The publication of stronger-than-expected US inflation figures acted as a hurdle for the Rand in mid-week trade as expectations for a more aggressive rate hike from the Federal Reserve in March, rattled markets.
However, ZAR exchange rates bounced back again by the end of the week as markets welcomed President Cyril Ramaphosa’s pro-business State of the Nation Address.
Meanwhile, the Pound faced some pressure through the first half of last week amidst renewed concerns over the UK’s cost-of-living crisis.
This downside was reinforced in the middle of the week as a result of some dovish comments from a Bank of England (BoE) policymaker, before a broadly positive UK GDP release lent some support to Sterling at the very end of the session.
Three Things to Watch Out for This Week
- UK Inflation
The publication of the UK’s consumer price index will likely be the primary focus for GBP investors this week. Will another acceleration of domestic inflation bolster BoE rate hike expectations and buoy the Pound?
- UK Retail Sales
Also set to influence Sterling will be the release of the UK’s latest retail sales figures. An expected rebound in sales growth at the start of the year, is likely to reflect positively on GBP exchange rates.
- Geopolitics
Fears of an imminent invasion of Ukraine by Russia could act as a key headwind for the Rand this week, with a cautious market mood likely to weaken the appeal of the emerging market currency.
Pound South African Rand Forecast
The Pound South African Rand exchange rate may look to mount a recovery this week as a more cautious market mood, coupled with some high-profile UK data releases offers opportunity for Sterling to rally.