Pound South African Rand Exchange Rate Weekly Forecast: GBP/ZAR Strikes Four-Month Low

The Pound South African Rand (GBP/ZAR) exchange rate plummeted last week. The pairing striking a four-month low following the market reaction to the UK’s mini-budget.

What’s Been Happening: Pound South African Rand Pummelled by UK Budget Concerns

The Pound fell off a cliff at the end of last week. An extremely negative reaction to Chancellor Kwasi Kwarteng’s mini-budget prompting a collapse in GBP exchange rates.

Investors were primarily unnerved by the Chancellor’s plans for sweeping tax cuts funded through increased borrowing. With analysts suggesting this could stoke inflation and would place fiscal policy at odds with monetary policy.

The previous day the Bank of England (BoE) only raised interest rates by 50bps. Disappointing GBP investors who had been betting on a 75bps increase.

Meanwhile, the Rand was supported by the South Africa Reserve Bank (SARB) last week. The SARB matched the Federal Reserve with a 75bps interest rate hike, while also suggesting South Africa is likely to avoid a recession this year.

However, the Rand’s gains were capped by domestic power concerns. State utility Eskom warned it may need to implement ‘unprecedented’ levels of load shedding following multiple power plant failures.

Three Things to Watch Out for This Week

  1. UK Mini-Budget Fallout

The Pound remains vulnerable to additional losses amid ongoing concerns over the UK’s ‘irresponsible’ budget. Will Kwarteng be able to reassure markets?

  1. BoE Speech

With the BoE unwilling to step in with an emergency rate hike. GBP investors will be keeping a close eye on speeches by BoE policymakers to offer fresh insight this week. A reluctance to go further in tightening monetary policy could see GBP/ZAR test new lows.

  1. South African Trade Figures

The most impactful ZAR data release this week will be South Africa’s latest trade figures. Could a narrowing of the country’s trade surplus drag on the Rand?

Pound South African Rand Forecast

The Pound South African Rand exchange rate is also likely to be influenced by market sentiment this week. A risk-off mood could provide some limited support for the pairing.

Matthew Andrews

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