Retail Sales Slump Fails to Dent Pound Sterling South African Rand (GBP/ZAR) Exchange Rate
An unexpected slump in March’s CBI reported retail sales index failed to prevent the Pound Sterling to South African Rand (GBP/ZAR) exchange rate surging on Wednesday morning.
As the index dropped from 0 to -18 this pointed towards a fresh bout of weakness within the UK retail sector, highlighting the continued detrimental effect of Brexit-based uncertainty.
However, the negative impact of the data was ultimately limited as the relative weakness of Pound Sterling (GBP) encouraged investor demand.
The GBP/ZAR exchange rate also benefitted from a general decline in market risk appetite, which saw the South African Rand (ZAR) come under renewed pressure.
Persistent market worries over the prospect of a continued global slowdown and a resurgence in the safe-haven US Dollar (USD) saw ZAR exchange rates trending sharply lower across the board.
South African Rand (ZAR) Vulnerable to Higher Inflation
The mood towards the South African Rand could sour further on Thursday if February’s producer price index data proves disappointing.
If inflationary pressure shows fresh signs of picking up this could drive fresh ZAR exchange rate losses, with higher inflation having the potential to stoke South African Reserve Bank (SARB) policy action.
Even so, investors do not expect to see any change in policy at the SARB’s March meeting.
As long as the central bank expresses a willingness to leave interest rates on hold in the coming months the South African Rand could recover some of its lost ground.
However, any shift towards dovishness may give investors fresh incentive to sell out of the Rand on Thursday.
A lingering sense of market risk aversion could also keep ZAR exchange rates biased to the downside in the days ahead, especially if global trade tensions fail to ease.
Brexit Worries Set to Expose GBP/ZAR Exchange Rate to Fresh Downside Pressure
Brexit-based jitters could soon see the GBP/ZAR exchange rate return to a downtrend, however, as markets continue to assess the likely outcome of the process.
There remains little sense of clarity over the shape of the UK’s future relationship with the EU, with MPs considering a variety of routes forward.
The Pound may also come under pressure if Friday’s UK GfK consumer confidence index deteriorates as forecast.
With consumer sentiment set to sour further on the month in March GBP exchange rates look vulnerable to renewed selling pressure.
Unless consumers demonstrate greater signs of resilience the Pound could struggle to hold onto its recent rebound, given lingering worries over the underlying health of the UK economy.
An upside surprise, however, could offer the GBP/ZAR exchange rate a fresh rallying point ahead of the weekend, even if the index remains within negative territory.