The Pound South African Rand (GBP/ZAR) exchange rate looks poised to rally this week as the escalation of tensions between Russia and Ukraine weighs on market risk appetite.
What’s Been Happening: Pound South African Rand Softens in spite of Bearish Market Mood
The South African Rand spent most of last week on the front foot, with the emerging market currency attracting support in spite of uneven risk appetite.
This uptick in ZAR exchange rates was partly thanks to a robust inflation reading. January’s figures fuelled speculation the South African Reserve Bank (SARB) may continue raising interest rates this year.
However, the Rand’s gains faded by the end of the week amidst a notable souring of risk sentiment.
At the same time, the Pound was supported by some broadly upbeat UK economic data. Domestic inflation unexpectedly accelerated last month, bolstering expectations for a March rate hike from the Bank of England (BoE).
However, Sterling sentiment was simultaneously undermined by the publication of the UK’s latest jobs report. December’s release highlighted how wage growth continues to lag well behind inflation, reinforcing concerns over the UK’s cost-of-living crisis.
Three Things to Watch Out for This Week
- Russia-Ukraine Crisis
Geopolitical tensions look to act as a key catalyst of movement in currency markets this week, with the situation in Ukraine likely to stifle risk appetite and weaken the appeal of emerging market currencies like the Rand.
- South Africa Budget
The publication of South Africa’s annual budget will also influence ZAR exchange rates. Investors will be eager to see how the government plans to finance some of the reforms promised in President Cyril Ramaphosa’s recent State of the Nation Address.
- BoE Speeches
A series of speeches from BoE policymakers will be the primary focus for GBP investors this week. Will a broadly hawkish outlook help to bolster the Pound?
Pound South African Rand Forecast
The Ukraine crisis looks likely to dominate the news cycle this week, potentially infusing fresh volatility into the Pound South African Rand exchange rate.