Pound South African Rand Exchange Rate Weekly Forecast: GBP/ZAR Undermined by BoE’s Dovish Hike

Trade in the Pound South African Rand (GBP/ZAR) exchange rate was mixed last week, with the pairing infused with notable volatility in the wake of the Bank of England’s (BoE) latest interest rate decision

What’s Been Happening: Pound South African Rand Rocked by BoE Rate Decision

The Pound initially strengthened last week, with the publication of the UK’s latest jobs figures reflecting positively on Sterling after reporting UK unemployment fell to pre-pandemic levels in January, whilst wage growth rose at a faster-than-expected pace.

However the Pound then faced a major setback in the latter half of the week, as the BoE concluded its March policy meeting.

While the BoE hiked interest rates as expected, its forward guidance proved more dovish than expected, triggering a sharp decline in GBP exchange rates on Thursday.

Meanwhile, fluctuating risk appetite and commodity prices resulted in mixed trade in the South African Rand last week, with the currency stumbling at the start of the week as commodity prices softened.

An upbeat domestic retail sales report then helped to propel the Rand higher in mid-week trade.

However these gains were reversed at the end of the session as market sentiment soured in response to concerns over the lack of progress being made in Ukraine-Russia peace talks.

Three Things to Watch Out for This Week

  1. UK Inflation Rate

The publication of the UK’s consumer price index will be in focus for GBP investors this week. Will another jump in inflation be enough to push the BoE to reconsider its dovish policy outlook?

  1. Spring Budget

Also set to influence Sterling will be Chancellor Rishi Sunak’s Spring Budget. Markets will be looking out for any measures which may help to tackle the UK’s cost-of-living crisis.

  1. SARB Interest Rate Decision

For ZAR investors the spotlight this week will be on the South African Reserve Bank’s latest interest rate decision. An expected rate hike is likely to bolster the Rand.

Pound South African Rand Forecast

In addition to this week’s data releases, the Pound South African Rand exchange rate could also face some volatility as a result of the ongoing war in Ukraine, particularly amidst renewed concerns that the Russian offensive is intensifying.

Matthew Andrews

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