Strong UK Wage Growth Encourages Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Gains
As weekly earnings excluding bonuses unexpectedly saw growth of 3.2% in the three months to September this prompted Pound Sterling (GBP) to push higher against its rivals.
After a muted start to the week due to Brexit uncertainty the Pound Sterling to South African Rand (GBP/ZAR) exchange rate surged higher this morning.
With weekly earnings rising at their fastest rate in a decade this encouraged greater optimism in the domestic outlook, as higher wage growth is likely to lead to increased consumer spending.
Stronger wages also improve the case for the Bank of England (BoE) to consider raising interest rates again sooner rather than later, even in the face of Brexit anxiety.
Even though the UK unemployment rate also unexpectedly picked up to 4.1% over the same period this was not enough to weigh down the Pound.
Risk Aversion Limits Demand for South African Rand (ZAR)
Market risk appetite has remained limited thanks to European political jitters, keeping the South African Rand (ZAR) on a softer footing.
Investors have seen less reason to favour the Rand over its rivals as global trade tensions continue to squeeze emerging market currencies.
Lacking in the support of any fresh domestic data, ZAR exchange rates were left to trend lower as markets fret over the outlook of the South African economy.
With investors wary of the potential for the economy to lose further momentum in the second half of 2018 the appeal of the South African Rand appears muted.
GBP/ZAR Exchange Rate Vulnerable to UK Inflation Disappointment
The mood towards the Pound could sour on Wednesday, however, if October’s UK consumer price index fails to impress.
Forecasts point towards a slight uptick from 2.4% to 2.5% on the year, moving the inflation rate further away from the BoE’s 2% target.
While higher inflation may encourage BoE policymakers to take a more hawkish view any increase in the CPI is unlikely to benefit GBP exchange rates.
If price pressures fall, on the other hand, this could help the Pound to extend its gains against the South African Rand further.
Jitters over Brexit may keep the GBP/ZAR exchange rate under pressure over the coming days, however, unless there are signs of progress towards a deal.
Steady Retail Sales May Support South African Rand (ZAR) Exchange Rates
September’s South African retail sales figures may offer a rallying point to ZAR exchange rates, meanwhile.
As long as consumer spending remains elevated this should help to limit the selling pressure on the South African Rand.
Even if sales hold up, though, worries over the outlook of the domestic economy may continue to dampen the spirits of investors.
Although there are hopes that trade tensions between the US and China could ease the South African economy remains vulnerable to any negative shift in global trade relations.
With the Federal Reserve appearing on course to continue tightening monetary policy in the months ahead the South African Rand looks set to come under increased pressure.