Pound South African Rand Weekly Summary: GBP/ZAR Exchange Rate Drops as UK Recession Fears Grow

The Pound South African Rand (GBP/ZAR) exchange rate fell over the course of last week. A poor economic outlook for the UK steadily pushed the currency pair lower. A surprise contraction in the UK’s economy on Thursday also contributed to the fall in GBP/ZAR.

The surprise announcement of further load shedding on Friday helped the pair to recover some of its losses, however. Stage 2 blackouts saw GBP/ZAR climb throughout the day.

What’s Been Happening: Truss Set to Abandon NI Protocol whilst Eskom Announces Surprise Load Shedding

The Pound (GBP) struggled against its rivals last week amid a gloomy outlook for the UK’s economy. GDP figures released on Thursday did the most damage to Sterling’s chances as the economy unexpectedly contracted.

Brexit-related headwinds also kept GBP suppressed last week. The concerns came after UK Foreign Secretary Liz Truss announced plans to unilaterally overrule the agreement through legislation if an agreement cannot be reached.

However, a strong US Dollar (USD) and a risk-off mood limited gains for the South African Rand (ZAR) throughout last week.

Eskom’s announcement on Friday of further power cuts increased fears that South Africa’s struggling power grid could hamper economic growth, allowing GBP/ZAR to recoup some losses

Speculation that the South African Reserve Bank (SARB) could increase interest rates in the coming week may have limited major losses for the Rand, however.

Weekly highlights

  1. UK & ZA Inflation Figures

Both countries are expected to see a rise in inflation rates this week. Could the figures increase rate hike expectations?

  1. Northern Ireland Protocol

With Liz Truss set to announce controversial legislation before parliament this week, could the plans see Sterling fall further?

  1. SARB Interest Rate Decision

Economists expect the SARB to raise interest rates by 50 bps, which could boost the Rand.

GBP/ZAR Forecast

An interest rate hike from the SARB could see the currency pair drop should it increase bets on ZAR. GBP/ZAR could also fall should the UK continue to stoke tensions between itself and the EU, increasing the possibility of a potential trade war.

Gareth Monk

Contact Gareth Monk


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