The Pound South African Rand (GBP/ZAR) exchange rate rose sharply last week amid South Africa’s ongoing power crisis. GBP/ZAR has since reached a two-year high this week as this uptrend remains in place.
Last Week: Pound South African Rand Firms amid SA Power Woes
The South African Rand (ZAR) faced significant headwinds last week. Initial pressure came amid concerns over higher US interest rates.
This downtrend was extended ahead of President Cyril Ramaphosa’s State of the Nation address. Ramaphosa declared a state of emergency amid escalating load shedding measures. Analysts warn South Africa’s ongoing power cuts are costing the country’s economy millions in lost productivity each day.
Meanwhile the Pound (GBP) got off to a flying start last week. Sterling initial gains were linked to hawkish comments from Bank of England (BoE) policymaker Catherine Mann.
A report from the National Institute for Economic and Social Research (NIESR) suggesting the UK will avoid a recession in 2023 helped to extend Sterling’s gains in mid-week trade.
The Pound then consolidated these gains at the end of the session. With the UK’s latest GDP figures revealing the country narrowly avoided slipping into a recession at the end of 2022.
Three Things to Watch out for This Week
- UK Inflation
The UK is expected to publish another double digit inflation reading this week. Will stubbornly high inflation reinforce BoE rate hike bets and boost the Pound?
- UK Retail Sales
GBP exchange rates will also be sensitive be the UK’s latest retail sales print. Economists forecast sales growth will have continued to contract in January. Sterling is poised to drop if this proves true.
- SA Inflation
Meanwhile the publication of South Africa’s own inflation figures could influence ZAR sentiment. Will a drop in inflation drag on the Rand?
Pound South African Rand Outlook
In addition to some notable data releases this week, the Pound South African Rand exchange rate is likely to remain sensitive to market sentiment. A downbeat mood potentially sending GBP/ZAR higher.