The Pound South African Rand (GBP/ZAR) exchange rate gained ground over the past week, following better-than-forecast UK PMIs and renewed Bank of England (BoE) rate hike bets.
What’s Been Happening: Pound Boosted amid Renewed Rate Hike Bets
The Pound (GBP) firmed over the past week, as investors began to increase bets on rate hikes from the Bank of England.
While initially beginning the week on muted grounds, Tuesday’s shock return to growth in the UK’s service index boosted Sterling. The data further pointed to further rate hikes from the BoE, as it showed resilience in the UK’s economy.
Hawkish comments from BoE Policymaker Catherine Mann strengthened these bets on Wednesday. However, GBP saw muted trade as the week closed amid a dearth of economic data.
Meanwhile, the South African Rand (ZAR) made some gains midweek, following South Africa’s latest Budget. News that the Government was aiming to absolve Eskom of some debts prompted modest cheer.
However, ZAR’s gains were swiftly erased on Friday. The Financial Action Task Force (FATF) added South Africa to its grey list, dealing a heavy blow to the country’s financial credibility.
Three Things to Watch Out for This Week
- BoE Speeches
BoE Governor Andrew Bailey and Chief Economist Huw Pill are due to speak this week. If they strike a hawkish tone, GBP could strengthen.
- South African PMIs
South Africa’s ABSA PMI is due to show a slowdown in manufacturing. If this index prints as forecast, ZAR could weaken.
- The Windsor Framework
As politicians deliberate over UK PM Sunak’s Northern Ireland deal, GBP could strengthen if a consensus is reached.
GBP/ZAR Outlook
Risk appetite is likely to play a key role in shaping the pairing over the week. With geopolitical tensions still simmering, markets may remain trepidatious. Any news of further escalation in the Ukraine-Russia war could weigh heavily on the risk-sensitive Rand.
Elsewhere, domestic headlines in the UK could add pressure to Sterling. With the cost-of-living crisis and inflation still bearing down on UK households, any further news may weaken the Pound.