The Pound South African Rand (GBP/ZAR) exchange rate saw fluctuating trade last week, as UK economic anxieties limited the Pound’s (GBP) appeal.
What’s Been Happening: GBP Undermined by Increasing Economic Fears
The Pound started off slowly last week, after reports from the Confederation of British Industry (CBI) indicated retail sales had dropped.
The Bank of England’s (BoE) monetary policy took to the spotlight over the week, owing to a lack of impactful data. Concerns were beginning to mount that the BoE could force the UK economy into recession, which weighed on Sterling.
These anxieties were pushed further on Wednesday, following comments from BoE Governor Andrew Bailey. He stated that the bank would ‘do what is necessary’ to curb inflation.
Fears were soothed on Friday, however, following confirmation that the UK had swerved a winter recession, allowing Sterling to recover.
Meanwhile, the South African Rand (ZAR) was unable to gain much ground last week. As the emerging-market currency is acutely risk sensitive, the session’s sombre mood diminished sentiment towards it.
Furthermore, a lack of clear data drivers prevented investors from finding any reason to support the Rand.
Three Things to Watch Out for This Week
- South African PMI
Due on Wednesday, South Africa’s private sector index is forecast to have improved over June but remained in contraction. Could this weigh on ZAR?
- UK Services PMI
Wednesday brings the final reading of the UK’s services index for June. Any unexpected results could trigger GBP volatility.
- UK Domestic Headlines
With the UK’s economic health under a microscope, any further indication of weakness could weigh on Sterling.
GBP/ZAR Outlook
With both sides of the pairing seeing a light data calendar, risk appetite is likely to be the core catalyst of movement this week. As the Rand is more susceptible to mood shifts, bullish trade could weaken GBP/ZAR. Conversely, a souring market mood would likely support Sterling.