Pound South African Rand (GBP/ZAR) Exchange Rate Soars as UK Inflation Beats BoE Targets

GBP/ZAR Exchange Rate Rises as UK Inflation Data Beats Forecasts in July

The Pound South African Rand (GBP/ZAR) exchange rate traded around R18.3936 today, soaring over 1% following this morning’s UK inflation figure.

July’s inflation beat forecasts and rose from 2.0% to 2.1%, exceeding the Bank of England’s (BoE) target of 2% and reviving hopes for static interest rates in the bank’s scheduled September meeting.

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

‘The domestic inflation backdrop suggests that UK rate cuts are unlikely to be forthcoming in the near-term, although as ever, everything depends on Brexit and where things stand after 31 October.’

However, Brexit developments curbed some of the Pound’s gains today, with Prime Minister Boris Johnson under increasing pressure to avoid a disorderly exit from the EU in October.

Former Chancellor Philip Hammond slammed Boris Johnson’s attempt to force through a no-deal, calling it a betrayal of the original referendum.

Mr Hammond said:

‘To set the bar for negotiations so high that we inevitably leave without a deal would be a betrayal. The prime minister said he would get a deal and we want to see him deliver that deal.’

ZAR/GBP Exchange Rate Sinks on US-China Trade War Jitters

The South African Rand (ZAR) failed to benefit from today’s release of year-on-year South African retail sales figures for June. These surpassed forecasts, rising from 2.2% to 2.4%.

US-China trade tensions continue to drag on the risk-averse ZAR today, despite US President Donald Trump announcing selected tariffs on Chinese goods will be delayed until September.

Mr Trump was critical of China’s failure to follow-through with large purchases of US agricultural products, reigniting tensions and leaving many South African Rand traders cautious.

South African President, Cyril Ramaphosa, said yesterday that the economy faces a ‘challenging economic cycle’, adding that state-owned enterprises like electricity provider Eskom have been problematic for the country’s economic health.

GBP/ZAR Outlook: UK Retail Sales for July in Focus

Pound (GBP) traders will be looking ahead to tomorrow’s release of the UK retail sales figure for July. This is expected to ease from 1.0% to -0.2%.

As a result, we could see Sterling lose some of today’s gains against the South African Rand.

Meanwhile, South African Rand (ZAR) investors will be paying close attention to US-China trade developments, with any signs of a compromise between the two superpowers proving ZAR-positive.

The GBP/ZAR exchange rate could hold onto today’s gains as the South African economy is expected to continue struggling amidst rising global trade tensions and domestic political and economic turmoil.

David Moore

Contact David Moore