GBP/ZAR Weekly Summary: Exchange Rate Gains as BoE Rate Hike Bets Intensify

The Pound South African Rand (GBP/ZAR) exchange rate saw some drastic swings over the past seven days. The currency pair ended the week higher amid sustained bets on further rate hikes from the Bank of England (BoE).

What’s Been Happening: Pound Climbs despite Poor Retail Data

The Pound saw muted trading at the beginning of last week amid a lack of significant data. Political uncertainty weighed on the currency throughout the week as the Conservative leadership contest continued.

Further woes for the retail sector likely pulled Sterling lower on Tuesday as sales volumes fell in July.

The currency saw sustained support throughout the week as market bets solidified around a 0.5% interest rate hike from the BoE. Andrew Bailey has given signals in week’s prior that a more aggressive rate hike was ‘on the table’, and that the central bank would act quickly to tame soaring inflation.

The US Federal Reserve’s interest rate decision on Wednesday prompted some sharp gains for the South African Rand (ZAR). Signals that the Fed would be potentially raising rates more cautiously in the future likely helped the Rand to climb.

A rise to PPI figures on Thursday also bolstered the currency amid bets that the South African Reserve Bank (SARB) would raise interest rates higher.

Weekly highlights

  1. BoE Interest Rate Decision

With a 0.5% rate hike largely priced in, will the central bank’s decision prompt significant movement in Sterling?

  1. Eskom Load Shedding

Will a forecast shortfall of 4000MW lead to further power cuts across South Africa?

  1. UK Services PMI

The final reading of July’s Services PMI is expected to indicate a further slowdown. Could this prompt losses in the Pound?

GBP/ZAR Forecast

The prospect of further industrial action in both the UK and South Africa could weigh on the currency pair in the coming week.

Proposals coming out of the African National Congress could dent confidence in the South African Rand this week. Economists are concerned that plans to nationalise SARB could scare off investors.

Gareth Monk

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