Last week, the Pound South African Rand (GBP/ZAR) exchange rate slumped to its lowest level since the start of the month amid growing fears of a UK recession. This week, GBP/ZAR has struck a fresh monthly low.
What’s Been Happening: GBP/ZAR Dives as UK PMIs Spark Recession Fears
After a subdued start to the week, the Pound (GBP) began to slide on Tuesday. New data from the Confederation of British Industry (CBI) showed that factory orders declined at their fastest pace in almost three years this month.
The latest PMI data added to concerns about the British economy the following day. Both the manufacturing and service-sector surveys printed below forecasts, leading to a shock contraction in overall business activity.
Meanwhile, the South African Rand (ZAR) found support as an upbeat market mood boosted the risk-sensitive currency.
The BRICS summit in Johannesburg also increased ZAR’s appeal, amid hopes for the South African economy’s future. A larger-than-forecast easing in the country’s inflation rate added to the optimism.
However, a souring mood and a stronger US Dollar (USD) saw the Rand slip towards the latter part of the week.
The Pound was unable to sustain its recovery however, with GBP/ZAR slipping back down by the end of the session.
Three Things to Watch Out for This Week
- BoE Pill Speech
Huw Pill, Chief Economist at the Bank of England (BoE), is due to speak on Thursday. If he sounds concerned about the UK’s economic health, Sterling could slide.
- South African Trade Data
The latest balance of trade data for South Africa is expected to show a narrowing trade deficit. Could this be enough to support the Rand?
- Risk Appetite
Market sentiment could drive volatility in the risk-sensitive Rand. If risk appetite continues to improve, ZAR could catch bids.
GBP/ZAR Forecast
Towards the end of the week, ZAR may be influenced by its strong negative correlation with USD amid some high-impact American data releases. We may see heightened volatility through the latter part of the session.