Pound South African Rand Exchange Rate Weekly Forecast: GBP/ZAR Undermined by Gloomy UK Outlook

The Pound South African Rand (GBP/ZAR) exchange rate trended lower last week, as Sterling sentiment was buffeted by an increasingly pessimistic outlook for the UK economy.

What’s Been Happening: GBP/ZAR Slides on Lacklustre UK data

The Pound (GBP) faced resistance last week, amid growing concern over the UK’s economic outlook, following the publication of some disappointing UK data releases.

First up was a mixed jobs report, which showed wage growth remained at a record high in July, but that unemployment rose to a near two-year high.

Even more damaging for GBP/ZAR was the UK’s latest GDP figures, as they reported a startling 0.5% contraction in growth in July.

In addition to stoking UK recession fears, these releases also further weakened Bank of England (BoE) interest rate expectations.

Meanwhile, the South African Rand (ZAR) was supported in the first half of last week by positive risk sentiment.

However, ZAR exchange rates were then pressured later in the week as state utility Eskom announced it would need to ramp up it scheduled power cuts again.

Three Things to Watch Out for This Week

  1. BoE Interest Rate Decision

The BoE is widely expected to deliver another interest rate hike this week. But any subsequent movement in the Pound will be driven by the bank’s forward guidance. Expect GBP exchange rates to slide if the BoE hints its hiking cycle has come to an end.

  1. UK Inflation

Potentially infusing volatility into Sterling ahead of the BoE’s rate decision will be the publication of the UK’s consumer price index. Could an uptick in inflation prompt a repricing of BoE rate hike bets?

  1. SARB Interest Rate Decision

The South African Reserve Bank (SARB) will also hold its latest policy meeting this week. While the SARB is expected to keep rates on hold, a hawkish outlook from the bank could still lift the Rand.

Pound South African Rand Forecast

Elsewhere the Pound South African Rand exchange rate is also likely to remain sensitive to market risk sentiment. Will a cautious mood ahead of several major central bank rate decisions lead investors to shy away from the Rand?

Matthew Andrews

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