Pound South African Rand Exchange Rate Recovers Ground Thanks to SA Retail Sales Slump

Drop in SA Retail Sales Fuels Pound South African Rand Exchange Rate Gains

A sharper-than-expected contraction in South African retail sales helped to shore up the Pound to South African Rand (GBP/ZAR) exchange rate.

As sales plunged -1.6% on the month in January this left the South African Rand (ZAR) on a softer footing against its rivals as confidence in the economic outlook diminished.

Lower levels of consumer spending and retail activity could help to drag on the economy over the course of the first quarter, raising the risk of another potentially lacklustre gross domestic product performance.

Coupled with a sense of market risk aversion ahead of the release of the Federal Reserve’s latest policy announcement ZAR exchange rates were left to trend lower across the board.

Rising Brexit Tensions Weigh Heavily on Pound Sterling Demand

Lingering anxiety over rising tensions between the UK and EU over border issues kept Pound Sterling (GBP) under a degree of pressure, meanwhile.

With trade conditions already showing signs of weakening since the start of the year the prospect of heightened political tensions left GBP exchange rates lacking in major support.

As the Pound has experienced strong gains over the course of recent weeks this left the currency exposed to a degree of correction, especially in the absence of positive domestic data releases.

BoE Policy Meeting Set to Spur GBP/ZAR Exchange Rate Volatility

The mood towards the Pound could sour further on Thursday if the Bank of England’s (BoE) policy announcement proves more dovish in nature.

Although no change in monetary policy looks likely at this stage the Pound to South African Rand exchange rate could still weaken in the wake of the meeting.

Signs that BoE policymakers have doubts over the strength of the economic outlook could weigh heavily on demand for the Pound.

On the other hand, if the central bank expresses confidence in the prospect of the economy recovering some of its lost growth momentum over the course of 2021 this may boost investor confidence.

South African Rand Exchange Rates Vulnerable to Building Permits Decline

In the wake of tonight’s Federal Reserve policy decision the South African Rand could also see some increased volatility.

If the general sense of market risk appetite falters further this would leave ZAR exchange rates exposed to additional selling pressure as worries over the global outlook linger.

Support for the Rand may also weaken in response to January’s South African building permits data, with forecasts pointing towards another sharp decline.

As long as the South African economy continues to demonstrate signs of struggling in the face of ongoing pandemic pressures the appeal of the Rand is unlikely to improve, offering a fresh rallying point to the Pound to South African Rand exchange rate.