The Pound South African Rand (GBP/ZAR) exchange rate traded in a wide range last week, as a mixed market mood infused volatility into the pairing.
What’s Been Happening: GBP/ZAR Fluctuates amid Mixed Market Mood
The GBP/ZAR exchange rate initially faltered last week as a pullback in the US Dollar (USD) helped to make the South African Rand (ZAR) more attractive to investors.
These losses were then reinforced as the Pound (GBP) was undermined by the release of the UK’s latest jobs data as signs of a slowing labour market weakened Bank of England (BoE) interest rate expectations.
Sterling then found its feet in the middle of the week as it was supported by a stronger-than-expected UK inflation print. While the Rand was simultaneously undermined after flaring tensions in the Middle East triggered a shift in risk appetite.
GBP/ZAR then largely sustained these gains through the second half of the week as a cautious market mood left investors wary of the emerging-market Rand. Although the Pound faced some volatility at the very end of the session after the UK’s latest retail sales figures printed well below expectations.
Three Things to Watch Out for This Week
- Risk Sentiment
The main catalyst of movement in the GBP/ZAR exchange rate this week is likely to be market risk appetite. If tensions in the Middle East continue to cool and US Fed rate hike expectations continue to wane, investors may be more willing to bet on the Rand.
- UK PMIs
The UK’s latest PMIs showed that the private sector remained in contraction this month, which could act as a headwind for the Pound going forward.
- South African PPI
The only ZAR data of note this week will be South Africa’s producer price index. Will a rise in producer prices boost South African Reserve Bank (SARB) rate hike bets and help to lift the Rand?
GBP/ZAR Forecast
Movement in the GBP/ZAR exchange rate is likely to remain volatile this week as geopolitical uncertainty is likely to continue to play a key role in determining the direction of the pairing.