GBP/ZAR Outlook: Slightly weaker, but likely to move sideways, as it is currently below its recent average and near recent lows without a clear driver to push it significantly.
Key drivers:
• Rate gap: The Bank of England has indicated a cautious approach toward rate cuts, while the South African Reserve Bank has already implemented cuts, making the ZAR more attractive.
• Risk/commodities: Oil prices remain strong, trading significantly above their recent average; this trend could support the ZAR given South Africa's commodity ties, but it may also pressure the GBP due to potential higher import costs.
• One macro factor: The UK's economic growth is projected to slow significantly in 2026, which may dampen investor confidence in the GBP.
Range: GBP/ZAR is likely to test recent extremes but may find it difficult to break out of this range.
What could change it:
• Upside risk: A more hawkish shift in the Bank of England's monetary policy could bolster the GBP.
• Downside risk: Further deterioration in UK economic indicators could increase pressure on the GBP.