The Pound South African Rand (GBP/ZAR) exchange rate stumbled last week. The pairing slipped as the Bank of England (BoE) signalled a slower pace of policy tightening. A downbeat outlook for the South African economy limited losses for GBP/ZAR, however.
What’s Been Happening: Pound Nosedives after BoE Interest Rate Meeting
The Pound (GBP) slumped over the past seven days. Sterling initially struggled amid gloomy forecasts from the International Monetary Fund (IMF).
GBP nosedived following the BoE’s 50bps interest rate hike on Thursday. The Pound was pulled lower by signals that the BoE would pursue smaller rate hikes in the future.
Sterling also came under pressure from persistent industrial action in the UK. Last week saw coordinated action across multiple sectors, otherwise known as ‘Walkout Wednesday’.
The South African Rand (ZAR) also saw losses last week. Further load shedding across the country weighed on the Rand.
The Rand was pulled lower on Friday by disappointing domestic data, however. The latest private sector PMI pointed to a December contraction, the fastest drop in activity since the end of 2021.
Weekly highlights
- UK GDP
The UK’s fourth quarter GDP figures are expected to report the country avoided a contraction at the end of 2022. Will this boost the Pound?
- BoE Speeches
Following Catherine Mann’s hawkish speech on Monday, investors will be watching speeches from multiple BoE policymakers for further signals of forward policy. Could hints of further rate hikes bolster Sterling?
- South Africa Manufacturing Data
Production in the sector is expected to have fallen sharply in December. Will the data add to last week’s disappointing PMIs and prompt further losses in ZAR?
GBP/ZAR Forecast
The prospect of further industrial action may continue to dent confidence in the Pound over the coming week. For the Rand, the implementation of any load shedding from Eskom could continue prompt further losses in ZAR.