Narrowing Gap Between Inflation and Wages could Trigger GBP/ZAR Exchange Rate Rally
The Pound to South African Rand exchange rate has risen by 0.7% recently, but remains at risk of fluctuating on upcoming wage growth data.
This will be 24th January’s earnings and unemployment stats, which come after recent reports of slowing UK inflation in December.
If average earnings increase significantly, the Pound could rise in value because it will indicate a reduced wage squeeze in the country.
Traders were previously disappointed as lower inflation means lower chances of interest rate hikes, but a reduced wage squeeze still spells good news for the UK economy.
Less income lost to the inflation gap potentially means more spending, which could contribute to Pound-supportive GDP growth in the future.
Rising UK Retail Sales could Trigger Further Sterling Advances
More immediately, the Pound could be influenced by UK retail sales figures out on 19th January, which are tipped to show year-on-year growth.
Higher retail sales for the December reading could push the Pound to Rand exchange rate higher, as it would indicate a strong close to 2017’s trading.
Rising sales in December will additionally conform to market expectations, where there is usually a burst of sales activity in the run-up to Christmas.
South African Rand to Pound Outlook: Will ZAR-Boosting Economic Revival Take Place?
The South African Rand to Pound (ZAR/GBP) exchange rate has proven unfavourable since the start of 2018, with the Rand gradually falling in value in the pairing.
This deterioration could be reversed in the coming months, however, if plans to revitalise the economy are pulled off successfully.
South Africa has recently seen the President of its ruling ANC Party replaced; Jacob Zuma lost his position to Cyril Ramaphosa in a late-2017 election.
Zuma remains national President, but there are hopes that he could be removed from this role in 2018, allowing unconstrained economic expansion in the country.
Ramaphosa’s plans include an increase to the minimum wage, better links with Kenya and a strong push for greater overseas investment in the country.
If Ramaphosa seems on track to deliver these planned changes, and if they actually result in a healthier economy, the South African Rand could advance against the Pound.
ZA Finance Minister in the Spotlight for 2018 Economic Growth
As well as Cyril Ramaphosa being a potential source of Rand movement, Finance Minister Malusi Gigaba could also influence the ZAR/GBP exchange rate in the future.
Gigaba has stated that the economy could see 2% growth in 2018, a bold estimate given high unemployment, poor forecasts and the looming threat of credit rating downgrades.
Striking an optimistic tone, Mr Gigaba has stated;
‘The capacity of the South African economy’s growth levels far exceeds the targets that we have set ourselves. We can even grow at more than 2%.
There are certain decisions we need to take, and if we take them, the economy can exceed our expectations this year’.
If South Africa can stave off further credit rating downgrades and post strong growth stats this year, the Rand may progressively advance against the Pound.