The Pound South African Rand (GBP/ZAR) exchange rate hit a one-month high last week, as Bank of England (BoE) hike bets supported Sterling.
What’s Been Happening: Pound Edges Higher on BoE Rate Hike Bets
The Pound (GBP) began the week on a quiet note, following confirmation that the UK manufacturing sector had contracted.
On Tuesday, the upbeat market mood kept the pairing on level ground, with Sterling enjoying modest support.
Expectations grew that the Bank of England (BoE) would hike rates by 50bps in August. These bolstered Sterling in mid-week trade and allowed GBP to shrug off a comparative lack of data.
Towards the end of the week, a dramatic shift in market mood sent Sterling skyrocketing against the South African Rand (ZAR).
The Rand fell sharply against its peers following the publication of the minutes from the Federal Reserve’s June meeting. The Fed’s hawkish rhetoric, coupled with strong US data, soured market sentiment and pulled the emerging market currency lower.
This was compounded by reports that Eskom may have to reintroduce load shedding measures following the failure of two power plants. With the blackouts having a severe impact on the South African economy already, additional outages worried investors.
Three Things to Watch Out for This Week
- UK GDP
Thursday brings the publication of May’s GDP data. Economists are forecasting a 0.3% contraction, which could dent GBP.
- South Africa Mining Production
South African mining production is forecast to have increased by 2.2% over May, which could bring cheer to ZAR on Thursday.
- Risk Appetite
Between impactful data releases, GBP could be left vulnerable to shifts in market mood. Could a bullish tone boost Sterling?
GBP/ZAR Outlook
Elsewhere, the latest SACCI business confidence index for South Africa could provide some impetus. Economists are forecasting that confidence will have diminished, from 106.9 to 105.8, which could weigh on the Rand.