The Pound South African Rand (GBP/ZAR) exchange rate saw some erratic movements over the past week. A weaker US Dollar (USD) initially weighed on the pairing, although the exchange rate recovered lost ground after hotter-than-expected UK inflation data. GBP/ZAR ended the week marginally higher.
What’s Been Happening: Pound Jumps as UK Inflation Remains in Double Digits
Mixed expectations for further action from the Bank of England (BoE) dented enthusiasm for the Pound (GBP) at the opening of last week.
However, a stronger US Dollar pushed GBP/ZAR higher by weighing on the South African Rand (ZAR).
Sterling leapt on Tuesday as wage growth data pointed to persistent inflationary pressures. This saw the currency pair climb, although its gains were short-lived. A surprise rise in unemployment saw the exchange rate shed most of its gains.
Double digit inflation for the UK prompted another spike in GBP and lifted the pairing on Wednesday. Additionally, core inflation remained stubbornly high.
However, a surprise uptick in South African inflation bolstered the Rand and prompted GBP/ZAR to give up ground.
Disappointing UK retail data saw the Pound tumble at week’s end. A slump in UK sales pulled the Pound Rand exchange rate back close to its starting position.
Weekly Highlights
- CBI Data
Data from the Confederation of British Industry (CBI) could dent GBP. Orders in the UK’s manufacturing sector are expected to remain at their lowest point since February 2021. Additionally, retail sector performance is set to decline in April. Will GBP fall in response?
- South African PPI
March’s monthly PPI is forecast to accelerate on Wednesday. Following last week’s surprise inflation increase, this could bolster ZAR.
- BoE Rate Hike Bets
Markets have largely priced in a 25bps hike from the central bank at their May meeting. Could bets on further policy tightening continue to lend support to Sterling?
GBP/ZAR Forecast
The Pound could come under pressure from additional industrial action and domestic headwinds this week. Additional load shedding could weigh on the South African Rand over the coming week.