The Pound South African Rand (GBP/ZAR) exchange rate was catapulted higher last week. Soaring amid South Africa’s worst power crisis since 2019.
What’s Been Happening: South African Rand Plummets amid Level 6 Load Shedding
The Pound South African Rand pressed higher amid notable ZAR weakness last week. This came as South African state utility, Eskom, struggled to keep the lights on.
Failures of generation unit and a labour strike forced Eskom to implement ‘stage 6’ load shedding. These rolling blackouts are estimated to cost the local economy ZAR100m in lost output per stage per day. Unsurprisingly this resulted in some heavy selling pressure on the Rand throughout the session.
Reinforcing the Rand’s losses was a prevailing risk-off mood.
The Pound, meanwhile, faced some headwinds at the start of last week. Sterling sentiment being pressured by renewed Brexit jitters as MPs backed the government’s Northern Ireland protocol bill.
The upside in the GBP/ZAR exchange rate was also tempered by comments from Bank of England (BoE) Governor Andrew Bailey.
In contrast to his peers on the European Central Bank’s (ECB) annual panel of central bankers, Bailey struck a notably cautious tone. Warning inflation in the UK is likely to remain higher for longer than in the US or Europe.
Three Things to Watch Out for This Week
- Load Shedding
The South African Rand could face an uphill battle this week as South Africa faces another week of load shedding. Although hopefully not to the same level as last week.
- BoE Speech
A series of speeches from BoE policymakers may act as the main catalyst for movement in the Pound this week. Will a dovish consensus lead to more pressure on Sterling?
- Brexit Uncertainty
Also potentially influencing GBP exchange rates will be ongoing Brexit concerns. The Pound possibly facing some headwinds if tensions between the UK and EU continue to grow.
Pound South African Rand Forecast
The Pound South African Rand exchange rate may also be driven by UK economic concerns. Mounting cost of living pressure potentially sapping the long-term outlook for Sterling.