The Pound South African Rand (GBP/ZAR) exchange rate rocketed higher last week as South Africa was pummelled by power cuts, flooding and soaring Covid cases.
What’s Been Happening: Pound South African Rand Soars on Eskom Loadshedding
The South African Rand suffered its worst selloff since 2020 last week as the currency was beset by local power cuts, flooding and a resurgence of Covid cases.
The Rand appeared particularly vulnerable to state utility Eskom’s introduction of scheduled power cuts. Also known locally as loadshedding.
Catastrophic flooding in the eastern KwaZulu-Natal province further undermined ZAR exchange rates. The Flooding caused billions in damage, while disrupting freight transport networks in the region.
South Africa also reported a sharp resurgence in Covid cases. This sparked fears restrictions could be put back into place.
The Pound, meanwhile, had it gains tempered by UK political uncertainty last week.
The GBP/ZAR exchange rate then fell back from its best levels after the latest UK retail sales and PMI releases disappointed. The data raised fresh concerns over a slowdown in consumer spending as well as denting Bank of England (BoE) rate hike bets.
Three Things to Watch Out for This Week
- Market Sentiment
The Pound South African exchange rate is likely to remain sensitive to market sentiment this week. Should a risk-off mood continue to prevail, GBP/ZAR could strengthen.
- BoE Bailey Speech
For GBP investors a key focus this week will be on a speech by BoE Governor Andrew Bailey. Expect the Pound to tumble if he avoids committing to another rate hike next week.
Eskom has warned that its loadshedding could return at short notice. Concerns over which could limit the upside potential of the Rand this week.
Pound South African Rand Forecast
The Pound South African Rand exchange rate could trend higher again this week as bearish market mood looks to maintain the pressure on the emerging market Rand.