The Pound South African Rand (GBP/ZAR) exchange rate fluctuated over the past week. Multiple central bank interest rate decisions prompted shifts in the pairing. Week’s end saw downbeat UK private sector data that limited any recovery for GBP/ZAR.
What’s Been Happening: GBP/ZAR Tumbles as South African CPI Beats Forecasts
A return of confidence in the European banking sector helped to boost the Pound (GBP) early last week. The Bank of England (BoE) reassured investors that the UK banking system was ‘safe and sound’.
The exchange rate then initially spiked on Wednesday after UK inflation printed hotter than expected.
However, GBP/ZAR slumped shortly after. A weaker US Dollar (USD) and a surprise rise in South African inflation saw the South African Rand (ZAR) rally.
The interest rate decision from the US Federal Reserve saw GBP/ZAR weaken further. The possibility of a softer pace of policy tightening from the Fed bolstered the Rand.
GBP/ZAR initially ticked higher following the Bank of England’s interest rate decision. However, signals that the BoE may be close to the end of its hiking cycle dented confidence in the pairing.
Upbeat UK retail sales data boosted the Pound on Friday morning before disappointing UK PMI figures slashed Sterling’s gains.
Three Things to Watch Out for This Week
- Final UK GDP
The UK’s final GDP results are expected to confirm a stall in growth in the fourth quarter. Could signs that the UK dodged a 2022 recession push Sterling higher?
- SARB Interest Rate Decision
The South African Reserve Bank (SARB) is expected to raise interest rates by 25bps on Thursday. Will the central bank hint at further rate hikes in the coming months?
- BoE Speeches
Will a speech from BoE policymaker Catherine Mann on Wednesday shore up GBP amid hints of further action from the central bank?
GBP/ZAR Forecast
With no other significant data releases this week, the Pound may be affected by domestic headwinds.
For ZAR, a forecast rise in monthly PPI ahead of the SARB’s meeting could boost ZAR. However, the implementation of further load shedding could put pressure on the Rand.