GBP/ZAR Weekly Summary: Exchange Rate Falls as UK Inflation Hits Fresh Highs

The Pound South African Rand (GBP/ZAR) exchange rate fell over the past seven days. The pair fell on Wednesday after UK inflation hit a 40-year high, heightening fears of a potential recession.

The GBP/ZAR pair was also likely pulled lower the South African Reserve Bank’s (SARB) decision to raise interest rates on Wednesday. The central bank rose rates by its highest rate since 2016.

Significant losses for the currency pair may have been limited by ongoing issues with the South African power grid, however.

What’s Been Happening: Rand Bolstered after SARB Interest Rate Hike

The Pound (GBP) struggled against many of its rivals last week, although began the week making unexpected gains. UK unemployment made a surprise fall on Tuesday which helped lift Sterling.

Wednesday saw GBP take a tumble however after UK inflation hit 9% in April. The figures prompted confidence in Sterling to plummet on Wednesday amid the country’s cost-of-living crisis. Sterling managed to firm on Friday following a surprise rise to retail sales in April.

The South African Rand (ZAR) began last week on the backfoot after power utility Eskom announced further ‘load shedding’.

The Rand leaped on Thursday however after the SARB decided to raise interest rates. The central bank hiked rates by 0.5% amid inflation just shy of the SARB’s maximum target.

Weekly highlights

  1. UK PMI Figures

With private sector growth having slowed more than forecast in May, will the figures pull Sterling lower?

  1. Further Load Shedding

With Eskom warning that power cuts may be increased at short notice, will the failing infrastructure weigh on the Rand?

  1. South African PPI Data

After the SARB’s interest rate hike last week, will a slowdown in producer price growth help to bolster the Rand?

GBP/ZAR Forecast

Fresh flood damage in South Africa could affect the currency pair this week following severe destruction earlier this year. Tensions between the UK and EU could limit gains for the pair however, as well as the imminent publication of the Sue Gray reports into the ‘partygate’ scandal.

Gareth Monk

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