The Pound South African Rand (GBP/ZAR) exchange rate slumped last week, following upbeat news about South Africa’s ongoing energy crisis.
What’s Been Happening: ZAR Rallies on News of Easing Load Shedding
The South African Rand (ZAR) started strong last week, owing to positive services data from China – one of South Africa’s key trading partners.
However, a poor private sector index print for May capped these gains. South Africa’s PMI printed at 47.9, falling further into contractionary territory.
This was swiftly reversed on Tuesday, following the latest GDP data print. This showed that the country’s economy had expanded in Q1 by 0.4% on a quarterly basis, swerving a recession.
As the week continued, the Rand climbed amid reports that Eskom would suspend daily load shedding until further notice. The news brought hope to ZAR investors, as it signposted an end to the blackouts which have been denting the South African economy.
Meanwhile, the Pound (GBP) kept in narrow boundaries over the past week.
Elevated Bank of England (BoE) interest rate hike bets served to buoy Sterling throughout the week. However, a lack of data releases prevented the Pound from gaining significant ground against most peers.
Three Things to Watch Out for This Week
- UK GDP
Wednesday brings the release of the latest UK GDP data. An expansion of 0.2% is forecast for April, which could boost Sterling.
- SA Retail Sales
South African retail sales data is due on Thursday, with economists forecasting a 1% contraction in April. If this prints accurately, it could weigh on the Rand.
- Load Shedding News
With load shedding being pared back, any further details on how Eskom intend to proceed could bring strength to ZAR.
GBP/ZAR Outlook
Elsewhere, risk appetite is likely to play a significant role in shaping the pairing. With the Rand being an acutely risk-sensitive currency, an upbeat market mood could weaken GBP/ZAR. However, ongoing BoE bets could provide the Pound with support, particularly after the latest UK jobs data showed that the labour market remains tight.