Pound to South African Rand Exchange Rate Dragged Lower on UK and South African Data

Poor South African data has made it easier for the Pound Sterling to South African Rand (GBP/ZAR) exchange rate to hold gains in recent weeks, but the latest South African retail results were somewhat relieving.

Since opening this week at the level of 18.76, GBP/ZAR has trended with a downside bias.

However, a lack of strong South African Rand (ZAR) support has limited the pair’s losses.

GBP/ZAR was a little weaker today amid poor UK data and stronger South African data influencing the outlook. Still, the pair continues to trend near the level of 18.70 at the time of writing.

Pound (GBP) Exchange Rates Weaker as UK Inflation Dampens Economic Outlook

Wednesday’s European session saw the publication of more key UK data. Like Monday’s disappointing UK growth and production stats, the latest inflation figures also worsened Bank of England (BoE) interest rate cut bets.

Inflation slowed to just 1.3% year-on-year, and the monthly figure slipped to a stagnant 0.0%.

With inflation at its worst levels in three years, rates that the BoE would cut UK interest rates as soon as this month rose to 60%.

Our @GarryYoung5 on #CPI figures: “The drop in 12-month CPI #inflation to 1.3%, plus weak GDP data, is likely to confirm the need for an immediate rate cut in the minds of a majority of MPC members. Whether this is really necessary is more debateable.” Full analysis out shortly — NIESR (@NIESRorg) January 15, 2020

South African Rand (ZAR) Exchange Rates Limited despite Strong Retail Results

Market demand for the South African Rand has been limited in recent weeks due to concerns of global geopolitical jitters, as well as a concerning South African economic outlook.

As a result of lasting concern about South Africa’s economy, today’s South African retail sales results were relieving to investors.

South African retail sales from November beat forecasts, coming in at 2.6% year-on-year. Analysts noted that it was likely due to the gaining popularity of Black Friday retail activity.

However, the South African Rand’s strength in reaction to the news was limited due to fears that consumer confidence is weakening anyway. According to Siphamandla Mkhwanazi, Senior Economist at FNB:

‘Although still optimistic, consumers are increasingly becoming weary of their financial standing, and are therefore unwilling to commit to substantial financial obligations at this stage,’

Pound to South African Rand (GBP/ZAR) Exchange Rate Awaits Central Bank Developments

The South African Rand may be advancing today, but if upcoming South African news disappoints investors the Pound to South African Rand (GBP/ZAR) exchange rate could advance again before the end of the week.

Tomorrow will see the publication of South African production and building permits results from November. If this data disappoints the Rand will weaken.

On the other hand though, strong data or a more optimistic tone from the South African Reserve Bank (SARB) in tomorrow’s policy decision, could further bolster a Rand recovery.

As for the Pound, Friday’s UK retail sales result could cause further Bank of England (BoE) interest rate cut bets if they disappoint.

The Pound to South African Rand (GBP/ZAR) exchange rate outlook could see a more notable move lower, if BoE rate cut bets continue to rise.