The Pound South African Rand (GBP/ZAR) exchange rate has dropped to an 11-day low this week as a recent recovery in market mood supports the risk-sensitive South African Rand (ZAR).
What’s Been Happening: GBP/ZAR Volatile as Market Mood Fluctuates
The Rand fell early last week as escalating US-China tensions spooked markets. Beijing warned Washington it would ‘pay the price’ as a US delegation travelled to Taiwan, which China views as a breakaway province.
These worries eased later in the week, helping the Rand recover, while a surge in gold prices also supported the commodity-linked currency.
However, a surge in the US Dollar (USD) following strong American jobs data on Friday saw ZAR shed its meagre gains.
Meanwhile, Pound Sterling (GBP) enjoyed a boost at the beginning of last week’s trade as investors priced in a 50-bp rate rise from the Bank of England (BoE).
After wavering midweek amid some poor UK data, GBP then tumbled following the BoE meeting. Although the bank did hike by 0.5% it also forecast a year-long UK recession starting at the end of this year.
GBP/ZAR managed to regain some losses on Friday, with the currency pair ending the week marginally higher.
Three Things to Watch Out for This Week
- UK GDP
Economists expect Friday’s UK GDP data to show a 1.3% contraction in the UK economy. Such a result could see Sterling drop.
- Risk Appetite
The risk-sensitive Rand is highly sensitive to the global market mood, so ZAR may shift in tandem with risk sentiment.
- Commodities Prices
ZAR is also affected by movements in the commodities market, so fluctuations in certain materials prices – particularly gold, platinum and coal – could impact the South African currency.
GBP/ZAR Forecast
Until Friday’s GDP data, risk appetite may be the dominant factor affecting the GBP/ZAR exchange rate. The market mood has shifted dramatically in recent weeks as huge global economic and geopolitical uncertainty remains. As a result, the Pound Rand pair may witness some volatility.