The Pound South African Rand (GBP/ZAR) exchange rate rallied last week, amid optimism that the UK faces a shallower recession than previously feared.
What’s Been Happening: Pound Slips as Retail Sales Disappoint
The Pound (GBP) initially struggled as markets continued to digest the UK’s Autumn statement and poor outlook.
Sterling did find support throughout the week from bets on a 50bps interest rate hike from the Bank of England (BoE). Better-than-forecast PMIs for the UK’s private sector on Wednesday also boosted GBP as it fuelled hopes for a milder recession.
These gains were tempered later in the week amid fears that more industrial action could further disrupt the UK economy.
The South African Rand (ZAR) began on the backfoot last week amid a pullback in global risk appetite. Further load shedding measures also weighed on the Rand.
The South African Reserve Bank’s (SARB) interest rate hike of 75bps bolstered the Rand on Wednesday, although gains were capped by downbeat growth forecasts.
A rebound in the US Dollar (USD) at the end of the week then placed renewed pressure on the Rand and allowed the GBP/ZAR exchange rate to close the session on a high.
Weekly highlights
- BoE Rate Hike Bets
Speeches from multiple BoE policymakers, including Governor Andrew Bailey, could give signals regarding the central bank’s forward policy. Will signs of a 50bps rate hike boost GBP?
- South Africa Trade Data
October’s trade surplus is expected to narrow amid soaring energy costs and continued power cuts. If the data prints as forecast, could the signs of slower growth pull ZAR lower?
- UK Manufacturing PMI
The final reading of November’s manufacturing PMI is set to confirm a contraction in the sector. Could the data further harm the UK’s outlook and dent Sterling?
GBP/ZAR Forecast
The prospect of widespread industrial action in the UK could dent confidence in the Pound. Any additional signs of future weakness in the UK economy could also weigh on Sterling.
A forecast contraction in South Africa’s manufacturing sector could pull ZAR lower if Thursday’s figures print as forecast.