Improved South African Unemployment Rate Weighs on Pound Sterling South African Rand (GBP/ZAR) Exchange Rate
A better-than-expected improvement in the South African unemployment rate offered a boost to the South African Rand (ZAR) this morning.
While unemployment in South Africa remains elevated in comparison to other economies investors were still encouraged to find that the rate had dropped from 27.5% to 27.1% in the fourth quarter.
This modest improvement suggests that the South African labour market is tightening, albeit gradually, and left the Pound Sterling to South African Rand (GBP/ZAR) exchange rate under pressure.
Even so, any slowdown in December’s manufacturing production data could still see the South African Rand slump today, in spite of an increased sense of market risk appetite.
Pound Sterling Muted Ahead of Bank of England Commentary
Comments from Bank of England (BoE) Governor Mark Carney could put fresh weigh on Pound Sterling (GBP) this afternoon, however.
In the wake of December’s unexpectedly weak gross domestic product reading, which saw growth contract -0.4% on the month, confidence in the outlook of the UK economy has diminished.
If Carney shows signs of increased caution this is likely to dent the GBP/ZAR exchange rate, even though the odds of a 2019 BoE interest rate hike have already fallen.
On the other hand, Carney could encourage the Pound to strengthen if he expresses fresh confidence in the odds of the UK not suffering a no-deal Brexit in March.
GBP/ZAR Exchange Rate Looks for Support on South African Retail Sales Data
Tomorrow’s South African retail sales data may offer the GBP/ZAR exchange rate an additional boost, meanwhile.
Signs of a slowdown in consumer spending would undermine confidence in the outlook of the South African economy, with weaker sales likely to act as a drag on growth.
Even if sales show another solid month of growth, though, any deterioration in wider market sentiment could still weigh on ZAR exchange rates.
Any fresh complication in US-China trade relations could put the South African Rand on the back foot once again, with the risk-sensitive ZAR vulnerable to any deterioration in the global economy and international trade.
UK Retail Sales Rebound to Boost Pound Sterling (GBP)
The mood towards the Pound could improve ahead of the weekend, though, if January’s UK retail sales data shows a solid improvement on the month.
After suffering a -1.3% contraction on the month in December investors are hoping to see retail sales excluding auto fuel recover some of their lost growth.
As long as consumers show signs of shaking off the pervasive sense of Brexit-based uncertainty that has been dragging on the UK economy as a whole in recent months.
Another month of decline, however, would leave the GBP/ZAR exchange rate exposed to fresh selling pressure on Friday.