Pound South African Rand Exchange Rate Forecast: Strong Commodity Prices to Continue to Undermine GBP/ZAR?

The Pound South African Rand (GBP/ZAR) exchange rate was infused with fresh volatility last week as a result of the war in Ukraine and commodity price dynamics.

What’s Been Happening: Pound South African Rand Gains Reversed by Surging Commodity Prices

The South African Rand got off to a poor start last week as the ratcheting up of Western sanctions against Russia spooked markets and pushed investors towards safe-haven assets.

South Africa’s heavy dependence on oil exports also saw the Rand stumble as crude prices soared to new multi-year highs.

However the Rand was able to bounce back through the second half of the week as the emerging market currency benefitted from a wider rally in commodity prices, particularly for key South African exports like precious metals.

Meanwhile, the Pound struggled to hold on to its initial gains last week as GBP investors became increasingly unnerved by the war in Ukraine and its potential impact on the UK economy.

Analysts warn the sharp rise in energy prices will fan inflationary pressures in the UK, exacerbating the cost-of-living crisis and suppressing consumer spending.

Bank of England (BoE) policymaker Silvana Tenreyro, warned recent developments will ‘intensify’ current trends and have a ‘negative impact on activity’.

Three Things to Watch Out for This Week

  1. Ukraine Crisis

The war in Ukraine is likely to continue to infuse volatility into the GBP/ZAR exchange rate, particularly in the wake of warnings from Moscow it could cut off European gas supplies if a Russian oil ban goes ahead.

  1. South African GDP

The publication of South Africa’s latest GDP figures looks to bolster the Rand this week after reporting growth rebounded in the last quarter of 2021.

  1. UK GDP

The UK is also set to publish its latest GDP figures this week. Will a stalling of growth in January exert some pressure on the Pound?

Pound South African Rand Forecast

Trade in the Pound South African Rand exchange rate is likely to remain erratic this week as the crisis in Ukraine continues to dictate market movement.

Matthew Andrews

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