GBP/ZAR Outlook: Bearish, as the rate is currently near recent lows and below its average, weighed down by several factors.
Key drivers:
• Rate gap: The Bank of England is taking a cautious stance with potential rate cuts, while the South African Reserve Bank's recent rate reduction supports ZAR.
• Risk/commodities: Oil prices are at recent highs, enhancing the attractiveness of the ZAR, which is traditionally linked to commodity markets.
• One macro factor: The UK’s economic growth is projected to slow down, which dampens confidence in the GBP as household incomes stagnate.
Range: GBP/ZAR is expected to hold within its recent range, since it is trading near the bottom of that range.
What could change it:
• Upside risk: A surprise shift in the Bank of England's policy could support the GBP.
• Downside risk: Continued strength in global commodity prices may strengthen the ZAR further, pushing GBP/ZAR lower.