The Pound South African Rand exchange rate has fallen today after UK inflation dropped in the month of February, knocking Sterling gains.
At the time of writing GBP/ZAR is currently trading at around 20.2683.
Pound (GBP) Dips over Slowdown in UK Inflation
The Pound dipped in today’s sessions as a slowdown in UK inflation for February missed forecasts and fell to 0.4%.
Howard Archer, chief economic adviser to the forecasting group EY Item Club, commented on the fall in inflation:
‘February’s is highly likely to mark inflation’s low point. The EY Item Club expects inflation to move markedly higher over the coming months. After a challenging Q1, an expected progressive firming of the economic recovery from early-2021 will also have some upward impact on inflation.’
‘There will also be some upward impact on inflation in October after the temporary VAT level for the hospitality and tourism sectors is raised to 12.5% at the end of September.’
The Pound did find support from flash PMI data for March which showed an overall growth in business activity and the fastest growth in the services sector since August.
Chris Williamson, chief business economist at IHS Markit, spoke on the growth saying:
‘The surge in business activity is far stronger than any economists expected, according to Reuters polls, and hints at only a modest contraction of GDP during the first quarter, adding to evidence that the economy has shown far greater resilience in the third lockdown compared to the first.’
South African Rand (ZAR) Steady Despite CPI Falling to an Eight-Month Low
The South African Rand has been supported in today’s session despite South Africa’s annual consumer price inflation dropping to an eight-month low of 2.9%.
The data comes ahead of a central-bank meeting later this week, where markets are expecting the South African Reserve Bank to hold its interest rates at 3.5%
ZAR gains are limited however as South Africa’s vaccine rollout remains slow and problematic.
The country’s vaccination rollout was delayed further in February after the AstraZeneca vaccine was paused. It was found to not be as effective against the South African variant of the virus.
It was replaced with Johnson & Johnson’s single-dose jab, but there have been limited supplies so far of the vaccine into the country so far.
Pound South African Rand Exchange Rate Outlook: UK Retail Sales in Focus
Tomorrow Pound investors will be focusing on the latest EU summit where the possible ban of vaccine exports to the UK is expected to be discussed.
If the EU do go ahead and ban the export of the AstraZeneca coronavirus vaccine to the UK Sterling could fall further.
Also in focus for Pound traders will be UK retail sales figures released on Friday which is expected to show a growth in sales during February.
In absence of any notable data the South African Rand will be driven by the global market mood in the coming days.