GBP/ZAR Outlook: Slightly weaker, but likely to move sideways due to being below its recent average and near recent lows without a clear driver.
Key drivers:
• Rate gap: The Bank of England's cautious approach limits the potential for a stronger pound compared to the South African Reserve Bank's expected interest rate cuts.
• Risk/commodities: Rising oil prices could benefit the South African rand, as stronger commodity prices often attract investor interest in emerging markets.
• One macro factor: Recent UK retail sales exceeded expectations, providing some support for the pound, but further gains may be constrained by ongoing inflation concerns.
Range: Movement is likely to hold within the current 3-month range, as both currencies face opposing pressures.
What could change it:
• Upside risk: A faster-than-expected recovery in UK economic data might strengthen the pound.
• Downside risk: A significant deterioration in political stability in the UK could cause increased volatility in the pound.