Pound South African Rand Weekly Forecast: GBP/ZAR Climbs as Load Shedding Fears Increase

The Pound South African Rand (GBP/ZAR) exchange rate climbed last week, as fears over worsening load shedding struck ZAR.

What’s Been Happening: Load Shedding Fears Dent ZAR

The South African Rand (ZAR) weakened at the start of the week, following a rise in unemployment. Printing at 32.9%, up from 32.7%, this weighed heavily on investor confidence in the South African economy.

The Pound (GBP), meanwhile, initially strengthened on cheery trade. However, an unexpected uptick in UK unemployment trimmed these gains, further capped by below-forecast wage growth.

Midweek, load shedding returned to strike the Rand. Eskom indicated that stage 8 load shedding may occur over the winter, leading to fears of prolonged blackouts.

Mixed comments from Bank of England (BoE) Governor Andrew Bailey then brought support for the Pound. Despite his acknowledgment of a cooling labour market, he reiterated that the BoE may have more to do to tackle inflation.

Over the end of the week’s session, market dynamics affected the pairing. Amid concerns over the US debt ceiling, the acutely risk-sensitive Rand weakened.

However, a lack of data releases prevented the Pound from gaining firm ground of its own volition.

Three Things to Watch Out for This Week

  1. UK Inflation

Wednesday brings the latest inflation data for the UK. Will persistently high core inflation boost BoE rate hike bets?

  1. SARB Interest Rate Decision

The South African Reserve Bank (SARB) meets to set interest rates on Thursday. If the SARB hints at a pause, ZAR could weaken.

  1. SA Inflation

Inflation in South Africa is forecast to cool to 7%, which may weigh on the Rand.

GBP/ZAR Outlook

Elsewhere, Friday’s UK retail sales data could provide further direction. A recovery is expected, which may bring strength to GBP by indicating a recovery in the retail sector.

Furthermore, any signs of further load shedding could weigh heavily on the Rand. With the blackouts already taking their toll on the South African economy, news of further outages may weaken ZAR rates.

John Mulcahey

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