The Pound South African Rand (GBP/ZAR) exchange rate traded erratically last week, amidst the unveiling of the UK government’s long-awaiting Autumn Statement.
What’s Been Happening: Pound South African Rand Volatile Following UK Budget
The Pound opened last week’s session on the back foot. An increasingly bleak outlook for the UK economy taking its toll on the currency.
At the same time, the Rand was buoyed by a bullish market mood, amid a pullback in the US Dollar.
Sterling quickly found its feet again on Tuesday. A surprisingly strong bump in wage growth in September reflecting positively on the Pound.
Data showing a massive surge in UK inflation in October then applied fresh pressure to the Pound on Wednesday. However, the impact on GBP/ZAR was offset by a below forecast retail sales print from South Africa.
Concerns over public sector strikes in South Africa then propelled the GBP/ZAR exchange rate to a two-week high. Before the Pound fell back with the publication of the UK government’s Autumn Statement.
While bond markets gave their tacit approval to the tax and spending plans, GBP investors were rattled after Chancellor Jeremy Hunt confirmed the UK is in a recession.
However, the Pound then ended the week on a positive note, on the back of a stronger-than-expected UK retail sales release.
Three Things to Watch Out for This Week
- SARB Interest Rate Decision
The South African Reserve Bank’s (SARB) latest interest rate decision will be the primary focus for ZAR investors this week. Will another 75bps rate hike help to shore up support for the Rand?
- South African Inflation
Also influencing ZAR exchange rates will be South Africa’s consumer price index. A stronger-than-expected reading could boost the Rand ahead of the SARB rate decision.
- UK PMIs
The highlight for GBP investors this week is likely to be the UK’s latest PMI releases. Will a deepening contraction in the private sector weigh on the Pound in mid-week trade?
Pound South African Rand Forecast
In addition to the above, the Pound South African Rand exchange rate is also likely to remain sensitive to market risk appetite. Will a gloomy mood leave the Rand vulnerable to losses?