The Pound South African Rand (GBP/ZAR) exchange rate slumped to a one-month low last week in response to the Bank of England’s (BoE) latest interest rate decision
What’s Been Happening: GBP/ZAR Tumbles as BoE Hits Pause
The Pound (GBP) and South African Rand (ZAR) were both muted at the start of last week. As investors braced for the BoE’s and South African Reserve Bank’s (SARB) interest rate decisions later in the week.
Sterling started to come under pressure in the middle of the week, with the release of the UK’s consumer price index. As a shock fall in inflation undermined BoE rate hike bets.
At the same time, the Rand firmed as South Africa’s own CPI figures reported an uptick in inflation.
The slump in GBP/ZAR then accelerated as the BoE concluded its latest policy meeting by announcing it would be pausing its hiking cycle.
While the SARB also left interest rates on hold, the hawkish tilt to its policy statement helped to propel the Rand higher.
The Pound then limped over the finishing line on Friday. Sterling tumbled in response to an abysmal UK services PMI as it revived recession fears and underpinned expectations that the BoE is done raising rates.
Three Things to Watch Out for This Week
- Market Risk Sentiment
Movement in the GBP/ZAR exchange rate may be primarily driven by risk sentiment this week. Expect to see the pairing rise if a risk-off mood prevails.
- South African Load Shedding
South Africa’s ongoing power crisis may continue to influence the Rand this week. If load shedding measures are ramped up again ZAR is likely to fall.
- UK GDP
The only GBP data of note this week will be the UK’s latest GDP figures. However, unless the finalised figures diverge from the previous estimate any impact on the Pound is likely to be negligible.
GBP/ZAR Forecast
With data incredibly thin on the ground this week, its likely movement in the GBP/ZAR exchange rate will be linked to market factors such as risk sentiment.