The Pound South African Rand (GBP/ZAR) exchange rate traded in a wide range last week. But was ultimately able to recover from a seven-week low struck at the start of the session.
What’s Been Happening: GBP/ZAR Rocked by Fluctuating Market Sentiment
The Pound (GBP) got off to a poor start last week. Sterling struck a new seven-week low against the South African Rand (ZAR) amid growing concern over the UK’s economic trajectory.
This followed reports from accountancy giant KPMG and ratings agency S&P Global Ratings as they warned the UK economy is likely to struggle through the second half of 2023.
GBP/ZAR then began to rally in the middle of the week. This appeared driven primarily by weakness in the Rand, which was pressured by a strengthening US Dollar (USD).
The Rand then mounted a recovery in the second half of the week. The rebound in ZAR was initially driven by a stronger-than-expected domestic producer price index. While a pullback in USD demand then reinforced the upside in the Rand.
The end of the week saw the Pound struggle to hold its ground against a resurgent Rand, as GBP investors were unfazed by an upwards revision to UK first quarter GDP.
Three Things to Watch Out for This Week
- Market Risk Sentiment
Movement in GBP/ZAR is likely to be highly sensitive to market risk dynamics this week. Could a cautious mood see investors steer clear of the Rand?
- US Labour Data
Lacklustre US labour figures could weaken USD demand later this week. Could this help to alleviate pressure on ZAR exchange rates?
- UK GDP
The only GBP data of note this week will be the UK’s services PMI, but barring an upwards revision to service sector activity this may simply reinforce the gloomy outlook for the UK economy and drag on the Pound.
GBP/ZAR Forecast
The GBP/ZAR exchange rate has already gotten off to a positive start this week amid a cautious market mood. Expect the pairing to extend these gains if this trend continues.