Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Slides as UK Shoppers Unexpectedly Cautious
UPDATE 14/11/19: The Pound Sterling South African Rand (GBP/ZAR) exchange rate slumped today, leaving the pairing trading at an inter-bank rate of R19.0405.
Thursday saw the Rand firm and rise against GBP despite the risk-off trend due to reports that negotiations between China and the US had ‘hit a snag’ over farm purchases.
In a note, senior research analyst at FXTM, Lukman Otunuga wrote:
‘Although investor appetite towards riskier assets continues to be strained by fading trade optimism and global growth concerns, this is not being reflected in the Rand today.
‘Given how the local currency remains buoyed […] further upside could be on the cards in the near term.’
Meanwhile, Sterling was left under pressure as UK retail sales unexpectedly declined as annual sales suffered the weakest annual increase in a year-and-a-half.
This likely weighed on the Pound as consumers helped the economy through a weak patch caused by the ongoing Brexit uncertainty.
Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Rises as Inflation Falls to Three Year Low
The Sterling South African Rand (GBP/ZAR) exchange rate jumped this morning following the release of UK inflation data, leaving the pairing trading at an inter-bank rate of R19.2637.
On Wednesday, in a boost to households, data revealed that UK inflation has fallen to its lowest level in close to three years.
The fall in inflation should ease the blow of yesterday’s data that revealed wage growth slowed, with real wage growth now rising by around 2.1%.
Consumer prices rose by a lower-than-expected annual 1.5% in October, down from September’s rise of 1.7%, although core inflation remained steady at 1.7%.
The Office for National Statistics said that lower energy bills, with gas prices slumping -8.7% and electricity prices falling by -2.2% between September and October.
Commenting on this morning’s data, an ONS spokesperson said:
‘A fall in utility prices due to a lowering of the energy price cap helped ease inflation in October. However, this was partially offset by rising clothing prices.’
UK Election Optimism Continues to Buoy Sterling (GBP)
Sterling remained steady and edged up against the Rand, despite weak economic data including yesterday’s disappointing UK employment and wage growth data.
Monday’s news that Nigel Farage’s Brexit Party would not contest Conservative Party seats won in the 2017 election continued to provide GBP with support.
This increased the chances the Tory Party will retain power, leaving Boris Johnson in No.10 and able to take the UK out of the EU by the new deadline.
Optimism increased further on Tuesday after YouGov showed the Conservatives had a 14-point lead over the Labour Party.
Commenting on this, head of research at MUFG, Derek Halpenny said:
‘The Pound is likely to remain well supported as long as the political news-flow pointing to a Tory majority continues. [But] the upside is limited.
‘There is a price to pay for these gains – a promised short transition period that will weigh on sentiment and with the economy set to weaken further as household spending weakens, Pound gains will be contained.’
South African Rand (ZAR) Falls as Trump Provides Little Clarity on US-China Deal
On Wednesday, the South African Rand slumped against the Pound as investors were reluctant to move towards riskier assets thanks to a lack of clarity over US-China trade tensions.
On Tuesday, US President Donald Trump offered no new details on discussions or announced a time and date for the signing of the ‘phase one’ trade deal as markets expected.
Instead, Trump emphasised Washington and Beijing would be completing an initial deal ‘soon’, although this depended on China’s ‘cheating’ on trade.
In his speech that echoed remarks the President made over the weekend, Trump said:
‘They are dying to make a deal. We’re the ones that are deciding whether or not we want to make a deal.
‘We’re close. A significant phase one trade deal with China could happen. Could happen soon. But we will only accept a deal if it’s good for the United States and our workers and our great companies.’
Pound South African Rand Outlook: Will ZA Mining Production Buoy ZAR?
Looking ahead to Thursday, the Pound (GBP) could extend its gains against the South African Rand (ZAR) following the release of the UK retail sales.
If retail sales rebound in October after stagnating in September, it could provide Sterling with an upswing of support.
Meanwhile, investors are likely to look to Thursday’s mining production data to look for clues on the South African economy’s health.
If mining production increases higher than expected in September, it will likely buoy the currency, and leave the Pound South African Rand (GBP/ZAR) exchange rate flat.