Bias: Bearish-to-range-bound, as GBP is below the 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Bank of England is expected to cut rates gradually, while the South African Reserve Bank has already reduced its rates, supporting the ZAR.
- Risk/commodities: Oil prices are currently above average, which may support the rand due to its significance in the South African economy, although volatility could disrupt this trend.
- Economic growth projections indicate UK GDP growth will slow, affecting the pound negatively, while the ZAR benefits from improving domestic fundamentals and foreign investment.
Range: GBP/ZAR is likely to drift within the recent 3-month range as both currencies react to broader market trends.
What could change it:
- Upside risk: A stronger-than-expected rebound in UK economic data could restore confidence in the GBP.
- Downside risk: Continued geopolitical tensions or a sudden dip in oil prices could negatively impact the ZAR's strength.