The Pound South African Rand (GBP/ZAR) exchange rate struck a new one-month high this morning. Extending the pairing’s gains from last week.
What’s Been Happening: Rand Undermined by Aggressive Fed Rate Hike Bets
The Rand faced some notable pressure last week. The emerging market currency slumping in response to expectations for more aggressive rate hikes from the Federal Reserve.
The hawkish rate hike bets came on the back of the latest US inflation figures. A stronger-than-expected uptick in core inflation prompt some investors to speculate on the possibility of a 100bps hike from the central bank.
Speculation for a massive Fed rate hike weighed heavily on the Rand, amid fears it could place even more pressure on South Africa’s debt laden economy.
While the Pound was able to climb against the Rand last week, it struggled to replicate its success against the majority of its other peers, following some mixed data releases.
Stronger-than-expected UK employment and inflation figures initially buoyed Sterling. The upbeat releases bolstering hopes for a 75bps rate hike from the Bank of England (BoE).
However these hopes were dashed in the latter half of the week. A surprisingly steep contraction in domestic retail sales weighing heavily on the Pound.
- BoE Interest Rate Decision
The BoE will be in the spotlight this week. Will the Bank opt for a 50bps or 75bps rate hike? Expect to see the Pound weaken if it’s the former.
- SARB Rate Decision
The South African Reserve Bank (SARB) will also deliver its latest rate decision this week. Could another rate hike offer some support to ZAR exchange rates?
- Load Shedding
At the same time, any upside in the Rand may be limited as South Africa faces ‘unprecedented’ levels of load shedding. Following the failure of multiple power stations over the weekend.
Pound South African Rand Forecast
The Pound South African Rand exchange rate may trade with notable volatility over the coming week as a result of some key central bank rate decisions and South Africa’s power crisis.