Pound South African Rand (GBP/ZAR) Exchange Rate Climbs 0.4% despite Improving SA Retail Sales

GBP/ZAR Exchange Rate Claws Back Losses Inspired by Rising Brexit Uncertainty

The Pound South African Rand (GBP/ZAR) exchange rate finally clawed back some of its recent losses today, leaving the pairing fluctuating around R17.3488.

The South African Rand (ZAR) failed to benefit from today’s release of the year-on-year South African retail sales figures for May which beat estimates and rose by 2.2%.

As pressure on consumers appears to be easing ahead of the expected rate cut from the South African Reserve Bank (SARB) on Thursday, this has been seen by some analysts as supportive of further consumer spending.

George Glynos, the Managing Director at ETM Analytics, was critical however, saying:

‘A rate cut will assist at the margins but it will not drive an economic recovery. The nature of South Africa’s economic problems are fiscal in nature, not monetary.’

Meanwhile, the Pound (GBP) has remained subdued today after no-deal Brexit fears increased yesterday.

UK markets became increasingly skittish following comments from the two Tory leadership hopefuls, Boris Johnson and Foreign Secretary Jeremy Hunt.

Both hardened in their stance on Brexit, saying they would dispense with the Northern Irish backstop despite hints of the EU’s unwillingness to budge on the condition.

GBP Exchange Rates Unmoved by UK Inflation Data

Pound Sterling (GBP) exchange rates failed to make any notable gains following the release of the year-on-year UK inflation data for June.

These confirmed consensus and stuck at 2%.

James Smith, a Developed Markets Economist at ING, commented:

‘While the UK consumer price inflation backdrop appears relatively benign, the fact that wage growth is holding up suggests it’s too early to be thinking about rate cuts. But the increasing uncertainty surrounding Brexit suggests policy tightening is equally unlikely this year.’

Today also saw London house prices fall at their fastest rate in a decade. These fell by -4.4% on an annual basis for residential properties in the capital.

Analysts have generally pointed to ongoing Brexit uncertainty as putting off potential buyers.

Sam Mitchell, a Chief Executive at Housesimple, was upbeat, however, saying:

‘[T]he housing market is still showing sturdier than expected signs of resilience amid political uncertainty. Low unemployment and historically low interest rates are leading to high demand from buyers supporting house price growth, particularly in the North West and West Midlands.’

GBP/ZAR Exchange Rate Outlook: SARB Interest Rate Decision in Focus

Pound Sterling (GBP) traders will be looking ahead to tomorrow’s release of the month-on-month UK retail sales figures for July.

The GBP/ZAR exchange rate could briefly fall back if consumer spending slowed as expected, but the interest rate decision from the SARB could prevent the rand from taking advantage of any Pound weakness.

The central bank is expected to cut the interest rate from 6.75% to 6.50%.

David Moore

Contact David Moore