The Pound South African Rand (GBP/ZAR) exchange rate climbed last week. The pairing saw some volatile movements amid fears of a global banking sector collapse. Gains for GBP/ZAR were capped by a continued pullback in Bank of England (BoE) rate hike bets.
What’s Been Happening: Pound Volatile amid Fears of Banking Sector Crisis
Both the Pound (GBP) and the South African Rand (ZAR) fluctuated over the past week amid an erratic market mood.
The Pound came under pressure at the beginning of the week from cooler wage growth figures. The data prompted a pullback in BoE rate hike bets, which weighed on Sterling.
A cautious market mood on Friday helped GBP to climb against its riskier peers. A drop in the latest public inflation expectations limited gains for Sterling, however, by further denting BoE bets.
On the other hand, the prospect of a collapse in the US banking sector lent support to the Rand. Markets bet on a slower pace of interest rate hikes from the US Federal Reserve, which bolstered ZAR.
However, the risk-sensitive Rand slumped as the crisis extended to European markets, spooking global investors. Persistent load shedding by power utility Eskom also pulled the Rand lower.
Weekly highlights
- BoE Interest Rate Decision
The central bank is widely expected to hike interest rates by 25bps on Thursday. Will the expected signals of a pause in policy tightening pull GBP lower?
- UK Inflation Data
Ahead of the BoE’s meeting, February’s inflation rate is forecast to have eased to 9.9%. Could the data see Sterling fall amid softer rate hike bets?
- SA Inflation Data
Wednesday’s figures are set to indicate an uptick in South Africa’s latest core inflation rate. Could the rise bolster ZAR amid renewed bets on interest rate increases?
GBP/ZAR Forecast
The Pound could see further losses if retail sales figures wane as forecast on Friday. A positive reading of the UK’s services sector PMI could help stem any losses, however.
For the Rand, further load shedding could dent confidence in the currency over the coming week.