The Pound South African Rand (GBP/ZAR) exchange rate trades at a two-month high this morning, as last week’s ZAR selling bias remains firmly in place.
What’s Been Happening: Pound South African Rand Rallies in Skittish Trade
The South African Rand (ZAR) got off to a poor start last week. Investors steered clear of the emerging market currency amid a gloomy market mood.
This was linked to some abysmal economic releases from China. A sharp plunge in imports and return of deflation stoked concerns about China’s post-Covid recovery. Fears over the knock-on impact on South Africa’s economy further undermined ZAR exchange rates.
A pullback in the US Dollar (USD) gave the Rand some temporary respite on Thursday. Before a rebound in USD left ZAR to stumble over the finish line.
The Pound (GBP) opened last week’s session on the front foot, as it was buoyed by Bank of England (BoE) interest rate expectations.
Sterling sentiment took a hit in mid-week trade. GBP investors were unnerved by a warning from a leading thinktank which suggested the UK faces five years of lost growth.
The Pound then closed the week on a positive note. A surprise expansion in UK GDP in the second quarter buoyed GBP sentiment as it stoked BoE rate hike bets.
Three Things to Watch Out for This Week
- UK Jobs Report
Injecting some volatility into the Pound at the start of this week is the UK’s latest jobs report. While wage growth rocketed to a new record high in June, unemployment also unexpectedly jumped.
- UK Inflation
The UK’s consumer price index could pull Sterling sharply lower on Wednesday. As a sharp drop in inflation is likely to weaken BoE rate hike bets.
- South African Jobs Report
South Africa will also publish its latest jobs report this week. Could another rise in unemployment in the second quarter pull the Rand lower?
Pound South African Rand Forecast
Market risk appetite will also be key in determining the direction of the Pound South African exchange rate this week. The pairing having already surged as China’s economic woes leads investors to shun the emerging market Rand.