SA Retail Sales Miss Fuels Pound South African Rand (GBP/ZAR) Exchange Rate Rally
The Pound to South African Rand (GBP/ZAR) exchange rate rallied sharply in the wake of an underwhelming South African retail sales figure.
As growth in sales slowed sharply from 4% to just 1.1% on the month this stirred fresh anxiety over the health of the economic outlook.
With the South African economy still appearing at risk of coming under greater pressure before the end of the year this weaker showing left investors with little reason to favour the South African Rand (ZAR).
Although market risk appetite generally improved in response to the latest news of Pfizer’s Covid-19 vaccine trial this was not enough to shore up ZAR exchange rates at this stage.
Support for Pound Sterling (GBP), meanwhile, picked up in response to a better-than-expected UK inflation rate.
SARB Policy Meeting Forecast to Increase South African Rand Volatility
Fresh volatility could be in store for the South African Rand on Thursday as a result of the South African Reserve Bank’s (SARB) policy meeting.
While no change in policy is anticipated at this stage ZAR exchange rates could still weaken in response to the latest policymaker commentary.
If the central bank takes a more dovish view on the economic outlook support for the South African Rand looks set to weaken further.
On the other hand, should the SARB express limited concern over the health of the South African economy or willingness to loosen monetary policy this could put a floor under ZAR exchange rates.
Persistent levels of market risk appetite may help to shore up the risk-sensitive Rand, though, as long as hopes remain high of the global economy recovering from the Covid-19 crisis sooner rather than later.
Lack of Brexit Agreement Set to Limit Pound Exchange Rate Upside
Even though the UK and EU do not appear set to reach a trade agreement before the EU leaders’ conference this may not put any significant pressure on GBP exchange rates.
As the two sides still seem willing to continue discussions, pushing for a deal before the end of December, this may limit pressure on the Pound in the days ahead.
However, persistent uncertainty over Brexit and the future trade relationship between the UK and EU could well exacerbate the existing pressures already facing the UK economy.
With growth appearing on track to contract once again in the fourth quarter the upside potential of the Pound could easily fade.
Forecasts point towards a fresh decline in November’s CBI industrial trends orders index, meanwhile, further limiting the GBP/ZAR exchange rate’s ability to push higher ahead of the weekend.