Pound South African Rand (GBP/ZAR) Exchange Rate Forecast: Ukraine Crisis Remains Key Risk Event for Pairing

The Pound South African Rand (GBP/ZAR) exchange rate traded in a wide range last week, as Russia’s invasion of Ukraine rocked the currency market.

What’s Been Happening: Pound South African Rand Infused with Volatility due to Ukraine Crisis

The South African Rand (ZAR) witnessed some dramatic swings last week as Russia’s invasion of Ukraine sparked considerable market volatility.

In the first half of the week hopes for a diplomatic solution saw ZAR exchange rates propped by risk-on trade.

Unsurprisingly investors quickly soured on the emerging market currency after Russia launched its invasion, with ZAR exchange rates plummeting over 1% on Thursday

However the Rand ultimately ended the week on a positive note as the currency was underpinned by a sharp surge in commodity prices.

Meanwhile, the Pound struggled to capitalise on any ZAR weakness last week. GBP exchange rates were undermined by some cautious messaging from the Bank of England (BoE).

Testifying before Parliament’s Treasury Committee as part of the bank’s quarterly Monetary Policy Report, BoE Governor Andrew Bailey warned markets ‘not to get carried away’ with aggressive rate hike bets.

This prompted GBP investors to reprice expectations for a half-percentage increase in interest rates next month.

Three Things to Watch Out for This Week

  1. Ukraine Crisis

The situation in Ukraine and the ratcheting up of sanctions by Western powers remains a key risk event this week. Events in the region may continue to infuse volatility into the GBP/ZAR exchange rate.

  • Commodity Prices

ZAR exchange rates are likely to remain sensitive to commodity market dynamics this week. If prices remain elevated the Rand is likely to benefit.

  • BoE Commentary

Several BoE policymakers are set to speak publically this week. Expect the Pound to weaken if they strike a broadly dovish tone.

Pound South African Rand Forecast

It seems safe to assume the crisis in Ukraine will continue to drive movement in the Pound South African Rand exchange rate this week. Any escalation in violence is set to infuse further volatility into the pairing.

Matthew Andrews

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