The Pound South African Rand (GBP/ZAR) exchange rate struck a new three-month low last week, amid signs global interest rates may be peaking.
What’s Been Happening: Pound South African Rand Slides on Dovish Central Bank Signals
The South African Rand (ZAR) got off to a roaring start last week. With GBP/ZAR plunging over 1% on Monday. The sharp upswing in the Rand was triggered by hopes that many of the world’s major central banks may be nearing the end of their hiking cycles.
Dovish interest rate hikes by the Federal Reserve and European Central Bank (ECB) appeared to support this hypothesis.
A recovery in the US Dollar (USD) led the Rand to face some resistance in the latter half of the week. But as the ‘Greenback’ was unable to sustain these gains, ZAR was quick to rebound.
Meanwhile, the Pound (GBP) opened the week on the defensive. Underwhelming UK PMIs sapped Sterling sentiment.
The downside in GBP/ZAR was cushioned later in the week by Bank of England (BoE) rate speculation. GBP investors remained confident the BoE will continue to raise rates in the coming months.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
The main catalyst of movement in the GBP/ZAR exchange rate this week will undoubtedly be the BoE’s interest rate decision. Expect the Pound to strengthen if the BoE raises rates by 25bps and signals more hikes are to come.
- UK Services PMI
Sterling may also be influenced by the publication of the UK’s latest Services PMI. Could an upwards revision to July’s finalised index provide support to Sterling?
- US Macroeconomic Data
In the absence of any notable ZAR data, the Rand may take its cues from some high-impact US data. If releases like Friday’s payrolls disappoint it makes it less likely the Fed will continue raising rates.
Pound South African Rand Forecast
The Pound South African Rand exchange rate may continue to trade in a wide range this week. The BoE’s impending rate decision, coupled with potential volatile market risk conditions are likely to infuse volatility into GBP/ZAR.