The Pound South African Rand (GBP/ZAR) exchange rate is off to a strong start again this week. The pairing being propelled to a new four-month high.
What’s Been Happening: Pound Wavers amid UK Political Jitters
The Pound South African Rand fluctuated last week, amid heightened political uncertainty in the UK.
This was attributed to the formal start to the Conservative leadership race, with GBP investors expressing doubts over some candidates’ economic promises.
The UK’s latest GDP figures offered some brief respite for Sterling in the middle of the week as May’s figures reported a surprise expansion of growth.
But ongoing political jitters and recession concerns then undermined Sterling again later in the week.
Meanwhile, the Rand initially strengthened last week. The end to the country’s recent power outages coming as a major relief to ZAR investors.
A pullback in the US Dollar (USD) then extended this ZAR upside through the first half of the week.
However the Rand then faltered again in the second half of the week as bets for a 100bps interest rate hike from the Federal Reserve spooked ZAR investors.
Three Things to Watch Out for This Week
- UK Inflation
In the spotlight this week will be the UK’s consumer price index. Will another acceleration of inflation exacerbate cost of living concerns or bolster Bank of England (BoE) rate hike expectations?
- UK Retail Sales
Also in focus for GBP investors this week will be the latest UK retail sales release. Another contraction in sales growth may raise doubts over growth in the second quarter and weigh on the Pound.
- SARB Interest Rate Decision
The South African Reserve Bank (SARB) is widely expected to raise interest rates by another 50bps this week, with the aggressive hike likely to reflect positively on the Rand.
Pound South African Rand Forecast
In addition to the data mentioned above, the Pound South African Rand exchange rate may also be influenced by the latest UK PMIs. Could a slowdown in private sector activity weaken Sterling?