The Pound South African Rand (GBP/ZAR) exchange rate saw volatile trade last week, with the pairing briefly striking a new all-time high as ZAR sentiment cratered.
What’s Been Happening: ZAR Stricken by SA-Russia Relationship Concerns
At the start of the week, the South African Rand (ZAR) slumped, amid renewed concerns over South Africa’s relationship with Russia and the potential for US-led sanctions.
This came as South Africa announced it would provide Russian President Vladimir Putin diplomatic immunity for his visit to the BRICS summit in August.
The South African Reserve Bank (SARB) warned of the harm these sanctions may cause to the economy, sharply denting the Rand.
This lack of confidence continued into Tuesday, with sentiment continuing to sour against the emerging market.
Midweek, the Rand struck record lows against most peers as the market mood dropped. However, on Friday, ZAR clawed back a firm recovery following the securing of a deal to lift the US debt ceiling.
This sparked upbeat trade, allowing the acutely risk-sensitive Rand to close on a high against the Pound (GBP).
Meanwhile, a lack of data failed to prevent Sterling from enjoying modest supported over the week. Continued momentum from the previous week’s escalating interest rate hike bets was the likely cause.
The Bank of England (BoE) are now expected to hike rates to 5.5% over 2023, following a shock jump in core inflation.
Three Things to Watch Out for This Week
- South Africa GDP Data
Later this morning, South Africa’s Q1 GDP data is due to print. An increase of 0.4% is forecast over the quarter, which could boost ZAR by showing the country avoided recession.
- BoE Rate Hike Bets
Continued bets on further tightening from the BoE could provide support to the Pound this week.
- SA Business Confidence
Business confidence in South Africa is forecast to drop to 30 for Q2, which could dent ZAR.
GBP/ZAR Outlook
Elsewhere, risk appetite is likely to be the main driver of movement for GBP/ZAR. If the market mood improves, ZAR may strengthen over Sterling. However, a souring market mood could shift the pairing in Sterling’s favour.