The Pound South African Rand (GBP/ZAR) exchange rate trended broadly higher last week, as Federal Reserve interest rate uncertainty weighed heavily on the Rand.
Last Week: Pound South African Rand Firms on Prospect of Fed Rate Hike
The South African Rand (ZAR) got off to a poor start last week. ZAR sentiment was initially undermined by President Cyril Ramaphosa’s cabinet reshuffle.
South Africa’s latest GDP figures piled more pressure on the Rand. A larger-than-expected contraction in Q4 growth stoked recession fears.
The ZAR selling bias was then reinforced after Federal Reserve Chair Jerome stunned markets by suggesting the US central bank may need to accelerate its monetary tightening again.
Powell’s comments also spooked GBP investors due to concerns over policy divergence between the Fed and Bank of England (BoE).
The latter half of the week infused fresh volatility in the GBP/ZAR exchange rate. This initially saw the Pound (GBP) strengthen on the back of a stronger-than-expected UK GDP release.
However, the Rand then rebounded as the collapse of Silicon Valley Bank (SVB) lead to a complete 180 on Fed rate hike bets. Relieving pressure on the emerging market currency.
Three Things to Watch out for This Week
- UK Budget
UK Chancellor Jeremy Hunt will unveil his first Spring Budget later this week. Will measures to boost UK growth be received positively by GBP investors?
- SA Retail Sales
A decline in South African retail sales growth is forecast to have deepened in January. Will the contraction stoke recession fears and pull the Rand lower?
- Eskom Load Shedding
ZAR exchange rates will also remain sensitive to Eskom developments. If the state utility continues to ease load shedding measures the Rand is likely to strengthen.
Pound South African Rand Outlook
The Pound South Africa Rand exchange rate may also be influenced by the ongoing fallout from the collapse of SVB. The repricing of Fed rate hike bets and resulting market uncertainty could infuse volatility into GBP/ZAR.