The Pound South African Rand (GBP/ZAR) exchange rate was mostly trapped in a narrow range last week. UK fiscal and political uncertainty limiting Sterling’s upside potential.
What’s Been Happening: Pound South African Rand Subdued amid UK Jitters
The Pound (GBP) initially firmed last week. A U-turn from Chancellor Kwasi Kwarteng regarding plans for tax cuts for the UK’s highest earners being welcomed by GBP investors.
After fluctuating amid confusion over when the Chancellor would publish his medium-term fiscal plan. The Pound weakened in mid-week trade as investors were unconvinced by Liz Truss’s speech at the Conservative party conference.
This then gave way to fresh selling pressure following a warning the UK’s credit rating could be downgraded. As Fitch joined S&P in cutting its outlook for the UK’s credit rating from ‘stable’ to negative’.
Meanwhile, movement in the South African Rand (ZAR) was tied to market risk appetite last week. At the start of this week this saw the Rand strengthen amid broad US Dollar (USD) weakness.
However, ZAR exchange rates then ran afoul of a souring market mood in the second half of the session. These losses being compounded by a sharp uptick in oil prices. South Africa is a net importer of oil and ZAR investors fear this may place even more pressure on the SA economy.
Three Things to Watch Out for This Week
- UK Fiscal Policy
While Kwarteng finally confirmed plans to bring forward his fiscal plan, markets remain unsettled by ‘Trussonomics’. Concerns over which could leave the Pound on the defensive.
- UK GDP
Also potentially influencing GBP exchange rates this week will be the UK’s latest GDP release. A stalling of growth in August is likely to weaken Sterling.
- Market Risk Appetite
In the absence of any high-impact domestic data. Movement in the Rand is likely to remain highly sensitive to market risk appetite this week. Will a broadly downbeat mood weigh on ZAR exchange rates?
Pound South African Rand Forecast
The Pound South African Rand exchange rate could struggle again this week. As ongoing UK fiscal uncertainty and weak market risk appetite are likely to limit movement in GBP and ZAR respectively.