The Pound South African Rand (GBP/ZAR) exchange rate rallied last week as a downbeat market mood saw investors steer clear of the emerging market Rand.
What’s Been Happening: GBP/ZAR Undermined by Risk-On Flows
The Pound (GBP) trended lower against the South African Rand (ZAR) through the first half of last week.
This dip in Sterling was triggered by comments from Bank of England (BoE) Chief Economist Huw Pill, as he said that speculation the BoE will begin to cut interest rates in 2024 ‘doesn’t seem totally unreasonable’.
At the same time, the Rand’s gains were kept in check by some worrying trade data from China.
A recovery in the US Dollar (USD) and a souring market mood then triggered a sharp drop in ZAR exchange rates as we entered the middle of the week.
The ZAR selling bias was reinforced in the second half of the week in the wake of hawkish comments from Federal Reserve Chair Jerome Powell.
Closing out the week was the publication of the UK’s latest GDP figures. While the UK avoided a contraction in the third quarter, a stalling of growth still lead to the Pound facing some resistance on Friday.
Three Things to Watch Out for This Week
- UK Inflation
The focus for GBP investors this week will be the UK’s consumer price index. October’s CPI figures are expected to report a rapid cooling of inflation. Will this further undermine BoE rate hike bets and pull the Pound lower?
- UK Retail Sales
Also set to influence Sterling sentiment is the publication of the UK’s latest retail sales figures. A rebound in sales growth in October could bolster GBP/ZAR at the end of the week.
- SA Unemployment
South Africa reported domestic unemployment unexpectedly fell to a two-year low in the third quarter. Will the surprisingly positive figures help to shore up support for the Rand this week?
In addition to a number of high-impact data releases, the GBP/ZAR exchange rate is likely to remain highly sensitive to market risk appetite this week. Will a bearish mood see the pairing continue to punch higher?