The Pound South African Rand (GBP/ZAR) exchange rate fell last week. The pairing was pulled lower by evidence of inactivity in the UK’s economy. A weaker US Dollar (USD) added to the downturn with the South African Rand (ZAR) strengthening in response.
What’s Been Happening: Pound Plummets as UK Economy Flatlines
The Pound (GBP) slumped over the course of last week. GBP opened the week amid thin trading conditions due to a UK national holiday, with GBP/ZAR dipping in response.
Sterling came under pressure on Wednesday following downbeat forecasts for the UK economy. The International Monetary Foundation (IMF) forecast that the UK will be the worst performing G7 economy in 2023.
A stronger Rand added to the pressure on GBP/ZAR on Wednesday. ZAR found strength amid a slowdown in US inflation.
GBP/ZAR’s losses were briefly tempered by hawkish comments from Bank of England (BoE) Governor Andrew Bailey on Wednesday. The pairing began its drop in earnest on Thursday following the latest UK GDP data.
The figures revealed the UK economy stagnated in February which pulled the Pound lower. GBP/ZAR’s losses were subsequently cushioned by an upward revision in January’s GDP, however
Finally, increased load shedding in South Africa also helped limit more drastic losses for the exchange rate.
Weekly highlights
- UK Inflation Data
UK inflation is expected to have cooled from double digits in March. Will the need for fewer BoE rate hikes see GBP slip?
- UK Retail Sales
Retail sales volumes for March are set to tumble by 0.5% on Friday. Could the downturn in the sector add to Sterling’s woes?
- South African Inflation Data
Following the South African Reserve Bank’s (SARB) surprise March hike, could the forecast inflation rise bolster hike bets?
GBP/ZAR Forecast
The Pound could see a further boost if April’s services PMI print as expected on Friday. The sector is forecast to remain in positive territory.
The Rand could trend lower if February’s retail sales growth eases as forecast on Wednesday.