The Pound South African Rand (GBP/ZAR) exchange rate surged last week. A deteriorating market mood weighed heavily on the Rand, allowing Sterling to advance despite its mixed performance elsewhere.
What’s Been Happening: Pound South African Rand Storms Higher in Bearish Trade
The South African Rand (ZAR) faced heavy selling pressure through last week’s session. As the emerging market currency fell afoul of a sharp deterioration in market risk appetite.
Concerns over global growth and a downgrading of the US government’s credit rating appeared to be the main factors weighing on market sentiment.
ZAR exchange rates eventually fell as much as 5% through the week. With the Rand only finding some respite on Friday after a sharp drop in the US Dollar (USD).
While the Pound (GBP) soared against the Rand, Sterling traded erratically against most of its other peers last week.
GBP exchange rates were particularly volatile in the wake of the Bank of England’s (BoE) latest interest rate decision.
A kneejerk response saw the Pound tumble in response to a ‘dovish’ 25bps interest rate hike. Before hawkish comments by Governor Andrew Bailey in his accompanying press conference helped to revive GBP sentiment.
Three Things to Watch Out for This Week
- UK GDP
The spotlight this week will be on the UK’s second quarter GDP figures. The release could see the Pound face headwinds as economists forecast growth will have stalled.
- US Inflation
The latest US inflation figures could trigger some volatility in ZAR exchange rates this week. An expected rise in US inflation last month may revive Federal Reserve interest rate expectations at the expense of the Rand.
- South African Manufacturing Production
South African manufacturing production is expected to have rebounded in June. Could the upbeat data lend some support to the Rand on Thursday?
Pound South African Rand Forecast
Movement in the Pound South African exchange rate is also likely to remain highly sensitive to market risk dynamics. If investors remain cautious GBP/ZAR could extend its upward momentum.