The Pound South African Rand (GBP/ZAR) exchange rate is currently trading at a three-month low as Monday’s sharp decline compounds last week’s slump.
What’s Been Happening: Pound South African Rand Plunges as UK Inflation Cools
The South African Rand (ZAR) initially stumbled last week, with the emerging-market currency being pressured by a weaker-than-expected Chinese GDP print.
However, the Rand was quick to rebound amid a recovery in risk sentiment. Meanwhile, the Pound (GBP) struggled to hold its ground amid a lull in UK data.
GBP/ZAR then tumbled in midweek trade on the back of the UK’s consumer price index. A weaker-than-expected inflation print saw Sterling plunge as bets for another 50bps rate hike from the Bank of England (BoE) evaporated.
The GBP/ZAR exchange rate rebounded from its worst levels on Thursday. The South African Reserve Bank’s (SARB) decision to leave interest rates on hold this month led the Rand to relinquish some of its gains.
The Pound was then able to end the week on a positive note following a stronger-than-expected UK retail sales print.
Three Things to Watch Out for This Week
- Chinese Stimulus
The Rand is already off to a strong start this week. The emerging-market currency is being supported by a pledge from China to step up its stimulus measures in order to support its post-Covid recovery.
- Fed Interest Rate Decision
The Federal Reserve’s latest interest rate decision could inject some volatility into the GBP/ZAR exchange rate on Wednesday. If the Fed signals its hiking cycle is coming to an end it could strengthen the Rand.
- BoE Rate Speculation
In the absence of any high-impact UK data releases, the Pound may remain sensitive to BoE speculation. GBP investors are likely to continue to reposition ahead of next week’s decision.
Pound South African Rand Forecast
The Pound South African Rand exchange rate could test new lows this week, assuming a prevailing risk-on mood continues to underpin ZAR.