Trade in the Pound South African Rand (GBP/ZAR) exchange rate was erratic again last week, with the pairing fluctuating in response to a mixed market mood.
What’s Been Happening: Pound South African Rand Rocked by Fluctuating Market Sentiment
The South African Rand initially got off to a strong start last week, with the emerging market currency being underpinned by rising commodity prices as well as a prevailing risk-on mood.
This upbeat mood was driven by reports of ‘constructive’ peace talks between Ukraine and Russia in which Moscow promised to would scale back ‘military activity’ around Kyiv and Chernihiv.
However, trade grew more cautious in the latter half of the week as Russia continued to shell targets in this region, while ZAR investors were disappointed to learn that South Africa’s plans to added roughly $6.5bn worth of private power generation had been delayed again.
Meanwhile, the Pound stumbled at the start of last week in response to some dovish comments from Bank of England (BoE) Governor Andrew Bailey.
Hopes for a negotiated end to the conflict in Ukraine offered some limited support to Sterling in mid-week trade, but it took a stronger-than-expected GDP print before the Pound was able to mount a recovery in the second half of the week.
Three Things to Watch Out for This Week
- Events in Ukraine
With alleged Russian atrocities in the Ukrainian town of Bucha casting fresh doubts over the peace process, the GBP/ZAR exchange rate may be infused with fresh volatility this week.
- BoE Comments
For GBP investors the focus this week is likely to be on a speech by the BoE’s Huw Pill, with Sterling sentiment potentially suffering if he remains dovish in his outlook for monetary policy.
- Commodity Prices
In the absence of any major ZAR data releases, the direction of the Rand is likely to be driven by commodity price dynamics, with a continued uptick in prices potentially underpinning the currency.
Pound South African Rand Forecast
In addition to the points mentioned above, the Pound South African Rand exchange rate could also be influenced by cost-of-living concerns in the UK, with Sterling potentially stumbling if the outlook continues to deteriorate.