The Pound (GBP) has risen sharply against the South African Rand (ZAR) on Thursday afternoon, advancing by 1.9% in the pairing.
This considerable appreciation is mainly down to the Rand sliding in value, given that today’s UK news has largely been concerning.
On the South African side, the ZAR has tumbled because of low risk sentiment among traders and a prolonged negative reaction to Tuesday’s GDP data.
South African economic growth slowed by more than expected during Q1 2018, for both the month-on-month and year-on-year readings.
(Last updated 16:40 June 7th, 2018)
Chance of Greater GBP/ZAR Exchange Rate Gains on Next Week’s Earnings Data
The Pound (GBP) has risen by 0.8% against the South African Rand (ZAR) today, but could face volatility next week when UK earnings and inflation rate data comes out.
In the former case, the coming Tuesday will bring UK average earnings figures for April, covering wage growth with and without bonuses included.
These readings are key when it comes to the Bank of England (BoE), as a faster pace of wage growth can increase the likelihood of an interest rate hike.
As it stands, the pace of growth with wages excluded is forecast to reprint at 2.9%, while some economists are predicting a with-bonuses rise from 2.6% to 2.9%.
Higher wage growth in both fields could trigger a sharp GBP/ZAR exchange rate rise, as this would suggest that the UK economy is more stable.
A BoE interest rate hike can lead to higher repayment costs for UK households, so higher on-average incomes would help to diminish the effects of a rate hike.
Will Pound Sterling to Rand (GBP/ZAR) Exchange Rate Rise on Higher UK Inflation?
Another upcoming UK data release that could influence the GBP/ZAR exchange rate will be UK inflation rate figures out on Wednesday.
The high-impact year-on-year inflation reading for May is predicted to rise, which might trigger a Pound (GBP) advance against the Rand (ZAR).
This is largely dependent on how the earnings figures print – if the pace of earnings growth rises then higher inflation could extend any existing Pound Sterling gains.
Rising inflation and earnings growth will reduce the risk of a wage squeeze on UK households, while also raising the odds of a BoE interest rate hike.
South African Rand to Pound (ZAR/GBP) Exchange Rate Volatility Forecast on ZA Sales Stats
The Rand (ZAR) could turn turbulent against the Pound (GBP) next week, when South African retail sales figures for April are released on Wednesday.
These measures of sales activity are tipped to show growth for the month-on-month reading, but a slowdown in year-on-year sales.
Annual sales activity has been positive since March 2017, so a strong year-on-year reading might still result in the Rand to Pound (ZAR/GBP) exchange rate rising.
Chance of ZAR/GBP Exchange Rate Gains on Greater Mining Output
Slightly further ahead, the Rand (ZAR) could also appreciate against the Pound (GBP) next week when high-impact mining statistics are released next Thursday.
This will consist of gold and mining production readings for April; the general mining-specific figures are expected to rise by 4.51% for the monthly and annual printings.
Such a rise wouldn’t completely reverse the -8.4% year-on-year loss previously seen, but might still be enough to raise confidence among Rand traders.
The South African economy is particularly dependent on continued mining activity and exports, so forecast-matching growth in the sector next week could boost the Rand.