The Pound South African Rand (GBP/ZAR) exchange rate climbed last week amid signs South African inflation is cooling.
What’s Been Happening: ZAR Drops as SARB Indicates Inflation has Peaked
A lack of data for both the Pound (GBP) and the South African Rand (ZAR) resulted in thin trading conditions for the pairing on Monday. Market bets on a 25bps interest rate increase from the BoE saw the pairing edge higher despite this.
Evidence of easing inflationary pressures in the UK weakened GBP on Tuesday. The latest surveys from the Confederation of British Industry (CBI) showed that cost pressures in the UK’s manufacturing sector receded in April.
Signs of cooler inflation in South African weighed on the Rand on Wednesday. Forecasts from the South African Reserve Bank (SARB) that headline inflation in the country had peaked added to this downturn.
A changeable US Dollar (USD) prompted some volatility in the pairing on Thursday. USD slipped later in the day after disappointing growth data, bolstering the Rand.
GBP/ZAR then regained lost ground on Friday after poor South African data. March’s trade surplus printed a surprise decline alongside a larger-than-expected budget deficit.
Weekly highlights
- South Africa Global PMI
SA’s private sector performance is forecast to have improved in April. Could signs of resurgent growth despite widespread power cuts boost ZAR on Thursday?
- UK Final PMIs
Will the Pound strengthen if April’s finalised services sector PMI confirms the index’s highest reading in 12 months?
- Eskom Load Shedding
South Africa’s power utility has announced that it will be increasing load shedding to stage 6 from Tuesday afternoon. Concerns over the impact on South Africa’s economy are likely to weaken the Rand.
GBP/ZAR Forecast
The Pound could find further support over the coming week if markets continue to coalesce around a 25bps rate hike from the BoE. At the same time, a cautious market mood could drag on the Rand throughout the week.