The Pound South African Rand (GBP/ZAR) exchange rate traded in a wide range last week, bouncing off a 20-day low. The fluctuations came amid political uncertainty in the UK and a shifting risk appetite.
So far this week, GBP/ZAR has wavered lower amid warnings that small British firms could go bust without further government support.
What’s Been Happening: GBP/ZAR Rallies after Hitting 20-Day Low
The South African Rand (ZAR) rose at the start of the week. The commodity-linked currency enjoyed a jump in the price of gold – one of South Africa’s key exports.
However, gold prices slipped and market sentiment soured, causing the risk-sensitive Rand to shed its gains.
The market mood then recovered somewhat at the end of the week, lifting ZAR exchange rates.
Meanwhile, the Pound (GBP) plunged early in the week after the UK’s latest services PMI fell far more than forecast.
After briefly touching a 20-day low on Wednesday, Sterling managed to bounce back. The gains came despite the ‘partygate’ report, with news of Rishi Sunak’s cost-of-living support package perhaps boosting GBP.
The Pound slipped towards the end of the week, however, with GBP/ZAR ending lower overall. Although the spending plan partly alleviates the squeeze on household incomes, analysts fear that rising costs will still hurt British businesses.
Three Things to Watch Out for This Week
- SA Balance of Trade
South Africa’s trade balance for April is forecast to narrow. Any surprise results could impact the commodity-linked currency.
- SA PMIs
Economists expect both the ABSA and S&P Global PMIs for South Africa to show stronger growth, which could boost ZAR.
- UK Domestic News
The ‘partygate’ scandal and the cost-of-living crisis continue to dominate UK headlines. Any negative news or political uncertainty will likely hurt Sterling.
With UK data thin on the ground this week, and the Platinum Jubilee cutting the week short, Pound movement may be limited. As a result, GBP/ZAR may trade primarily on South African Rand sentiment.