Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Slumps as UK Wage Growth Slows
Signs of a slowdown in UK wage growth left the Pound Sterling to South African Rand (GBP/ZAR) exchange rate in a slump, even as the labour market continued to show signs of tightening.
As growth in average weekly earnings eased from 3.5% to 3.2% on the year in the three months to March investors were given fresh incentive to sell out of Pound Sterling (GBP) this morning.
Weaker wage growth could lead to a lower level of consumer spending in the months ahead, limiting the potential for a stronger second quarter of economic growth.
Although the headline unemployment rate bettered forecasts, delivering an unexpected drop to a fresh 44-year low of 3.8%, this was not enough to shore up GBP exchange rates today.
Rising South African Unemployment Fails to Prevent Rand Gains
South African unemployment saw an uptick, meanwhile, rising from 27.1% to 27.6% in the first quarter as the economy continued to demonstrate signs of vulnerability.
This loosening of the labour market failed to weigh down the South African Rand (ZAR) at this juncture, even though higher levels of unemployment do not bode well for the growth outlook.
The impact of the latest escalation in the US-China trade spat began to ease as markets processed the prospect of a prolonged period of trade anxiety.
With market risk aversion temporarily easing the mood towards the Rand improved once again, even though this fresh barrage of mutual trade tariffs could still weigh heavily on global growth.
GBP Exchange Rates Soften as Cross-Party Brexit Talks Face Collapse
Uncertainty over Brexit also limited the strength of GBP exchange rates this morning, with the Conservative and Labour leaderships remaining at odds on the issue.
As Theresa May remains opposed to the idea of a second people’s vote investors see little chance of an imminent breakthrough, raising the risk of Brexit anxiety hanging over the economy for the foreseeable future.
Unless there are signs that the two sides are willing to move towards a compromise the appeal of Pound Sterling is unlikely to see any material improvement in the days ahead.
With the cross-party talks appearing at serious risk of collapse the GBP/ZAR exchange rate looks set to remain on the back foot in the near future.
Weaker Retail Sales Set to Dent South African Rand
Demand for the South African Rand could ease tomorrow, however, if March’s retail sales data weakens as forecast.
As investors expect to see sales growth slow sharply on both the month and the year this could ignite fresh concerns over the underlying strength of the South African economy.
Lower levels of retail sales would suggest that domestic confidence is deteriorating once again, leaving ZAR exchange rates vulnerable to selling pressure.
On the other hand, an upside surprise from the sales data could see the South African Rand trending higher across the board as greater consumer confidence points towards a healthier economic outlook.