The Pound South African Rand (GBP/ZAR) exchange rate slipped to a one-month low last week before recovering and ending the week higher.
What’s Been Happening: GBP/ZAR Recovers as Rand Faces Headwinds
The Pound (GBP) initially wavered lower last week as thin trading conditions following the bank holiday weekend left Sterling open to losses.
This saw GBP slide to a one-month low against the South African Rand (ZAR) as the latter currency enjoyed its negative correlation with a weakening US Dollar (USD).
GBP/ZAR began recovering midweek as new South African data pointed to fiscal weakness in the country’s economy. Private sector credit grew less than forecast in July, while the South African government reported a record budget deficit in the same month.
A recovery in the US Dollar put further pressure on the Rand on Thursday, with GBP/ZAR climbing to a nine-day high.
However, Sterling trimmed its gains at the end of the week amid worries about the UK economy, while the risk-sensitive Rand enjoyed an upbeat market mood.
So far this week, GBP initially saw a renewed upside, hitting a two-week high against ZAR. However, unexpectedly strong South African GDP data has given the Rand a boost.
Three Things to Watch Out for This Week
- Risk Appetite
The market mood could continue to impact the risk-sensitive Rand this week. If sentiment sours, ZAR could suffer losses.
- South African Business Confidence
On Thursday, business confidence in South Africa is expected to decline for the sixth consecutive quarter heading into Q3. The Rand could slide if the data prints as expected.
- UK Domestic News
Amid a lack of GBP data, domestic British headlines could impact the Pound. Will recession worries pressure Sterling?
GBP/ZAR Forecast
At the time of writing, South Africa’s GDP growth rate for the second quarter surprised markets, with economic growth unexpectedly accelerating. This could see the Rand rally through the first half of the week, although forecasts of downbeat data later on may see ZAR trim any gains.