The Pound South African Rand (GBP/ZAR) exchange rate spiked last week. The pairing struck a two-month low, before relinquishing the bulk of these gains though the latter half of the session.
What’s Been Happening: GBP/ZAR Jumps as Eskom Imposes New Load Shedding Measures
The South African Rand (ZAR) was met by a sharp selloff in the first half of last week. This came as South Africa’s state utility, Eskom, was forced to impose its worst power cuts on record.
The news sent ZAR exchange rates sharply lower amid concerns over the impact the load shedding could have on local economic activity.
At the same time, the increasingly risk-sensitive Pound (GBP) firmed at the start of the week amid positive risk-flows.
However, Sterling then faced notable resistance in the middle of the week. This was trigged by comments from Bank of England (BoE) Governor Andrew Bailey.
Speaking before Parliament’s Treasury committee Bailey suggested UK inflation will fall ‘quite markedly’ by the end of the year. While he also claimed the BoE is ‘nearer to the top of the [tightening] cycle’.
His remarks weakened BoE rate hike bets and saw the GBP/ZAR exchange rate close the week well below its best levels.
Three Things to Watch Out for This Week
- UK Jobs Report
The UK’s latest jobs report proved to be a mixed bag. While unemployment rose to 4.3%, average earnings remained at a record high. Could the strong wage figures help to temper further losses for the Pound?
- UK GDP
This week will also see the publication of the UK’s latest GDP figures. Analysts forecast growth will have contracted at the start of the third quarter, while may apply pressure to Sterling on Wednesday.
- Eskom News
In the absence of any other data, the Rand is likely to remain highly sensitive to Eskom developments. If Eskom is forced to ramp up load shedding measures again, ZAR exchange rates may be vulnerable to fresh losses.
Pound South African Rand Forecast
Elsewhere the Pound South African Rand exchange rate is also likely to remain sensitive to market risk sentiment. A broadly upbeat market mood could lend support to the Rand.