The Pound South African Rand (GBP/ZAR) exchange rate trended lower last week as the outlook for the UK economy continued to darken. Although the pairing subsequently rebounded at the start of this week.
What’s Been Happening: GBP/ZAR Dented amid UK Economic Concern
The Pound spent a good portion of last week on the defensive. An increasingly bleak UK economic outlook weighed on Sterling sentiment.
Adding to the pressure on GBP exchange rates was the government’s announcement it would cut its business energy support package from April. Sparking concern that hundreds of firms could go bust.
However, the end of the week saw the Pound find its footing again. A stronger-than-expected GDP reading helped buoy GBP/ZAR, amid hopes the UK may have avoided a recession in 2022.
The South African Rand, meanwhile, drew support through the first half of the week. A prevailing risk-on mood boosted the appeal of the emerging market currency.
This was tied to easing Federal Reserve rate hike bets after data showed US inflation continued to cool in December.
The second half of the week saw the Rand face some headwinds as state utility Eskom announced it would have to implement stage-six loadshedding measures.
South Africa’s ongoing energy crisis continued to plague the Rand at the start of this week.
Three Things to Watch Out for This Week
1. UK Inflation
In the spotlight this week will be UK’s consumer price index. Will a higher-than-expected inflation print spook GBP investors
2. UK Retail Sales
Also of note to GBP investors this week will be the latest UK retail sales reading. A rebound in sales growth at the end of 2022 may bolster the Pound.
3. SA Inflation
The publication of South Africa’s own CPI figures will be the focus for ZAR investors this week. Another strong reading could bolster South African Reserve Bank (SARB) rate hike expectations and lift the Rand.
Pound South African Rand Forecast
The GBP/ZAR exchange rate is also likely to remain sensitive to market risk appetite and Eskom developments this week.