The Pound South African Rand (GBP/ZAR) exchange rate traded in a wide range over the past week, mostly as a result of mixed risk flows.
What’s Been Happening: GBP/ZAR Fluctuates as Market Sentiment Wavers
The South African Rand struggled to attract support last week as the currency was undermined by weak risk appetite.
This came amidst concerns over new lockdowns in China as well as heightened expectations for a series of aggressive interest rate hikes from the Federal Reserve, which bolstered the US Dollar at the expense of most of its peers.
Further undermining the Rand were warnings that South Africa could face up to 100 days of scheduled powers cuts this year as state utility, Eskom struggles to improve generation capacity.
Meanwhile the Pound also struggled last week, amidst growing concern over the UK’s economic trajectory.
Concerns that the UK may be headed towards a recession further limited demand for Sterling.
Alongside a reining in of Bank of England (BoE) rate hike bets, this left the Pound with limited upward momentum last week.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
All eyes will be on the BoE’s latest interest rate decision this week. A modest hike is priced in, but will some dovish forward guidance push the Pound lower?
- UK Local Elections
Also of note to GBP investors this week will be the latest UK local elections. A poor performance by the Conservatives could pile more pressure on Boris Johnson to resign as PM.
- Fed Interest Rate Decision
Elsewhere the Fed’s own interest rate decision could act as a headwind for the Rand this week as an aggressive rate hike and hints that there are more to come is likely to raise concerns over the impact on South Africa’s economy.
The GBP/ZAR exchange rate may continue to trade erratically this week, amidst a mix of high-impact data and UK political uncertainty.