Pound South African Rand Exchange Rate Climbs despite Week of Mixed UK Data
The Pound South African Rand (GBP/ZAR) exchange rate has advanced this week, despite weakness in the Pound (GBP) throughout the week. Investors have been selling the South African Rand (ZAR) since yesterday’s South African Reserve Bank (SARB) decision.
Since opening this week at the interbank rate of 20.35, GBP/ZAR has seen volatile movement. Investors were hesitant to sell the Rand until the SARB decision, when GBP/ZAR saw a jump in demand.
GBP/ZAR touched on a weekly best of 20.72 yesterday, and the pair has since been steadying slightly. At the time of writing on Friday, GBP/ZAR trends in the region of 20.68.
Next week will see the publication of significant data including UK growth and South African manufacturing PMI.
Pound (GBP) Exchange Rates Lack Drive for Stronger Recovery
The Pound has actually been fairly unappealing in the past week. It has weakened against many major rivals due to fresh coronavirus recovery uncertainties and underwhelming data.
It has been able to recover against the South African Rand due largely to the Rand’s own weakness.
Today’s UK retail sales results from February were mixed. While the headline yearly retail rate figure fell short of expectations, analysts overall believed Britain’s retail sector would still rebound as shops reopen in the coming months.
South African Rand (ZAR) Exchange Rates Weaken after South African Reserve Bank (SARB)
The South African Rand saw relatively resilient trade for most of the past week – until the South African Reserve Bank (SARB) held its March policy decision yesterday.
Markets had been speculating that the SARB would signal more hawkish interest rates, due to rising inflation and rate hikes seen in some emerging markets in recent months.
However, the bank instead showed no signs that it was planning to become more hawkish soon. This more dovish than expected tone weighed on the South African Rand towards the end of the week.
According to Economists at ETM Analytics:
‘While market inflation concerns have spiked, the SARB doesn’t seem overly concerned that a sustained episode of surging inflation is ahead of us,
We do see some risk of policy normalisation towards the back end of the year. That said, the degree of policy normalisation is expected to be more moderate than the market is currently pricing in.’
Pound South African Rand (GBP/ZAR) Exchange Rate Awaits UK Growth Report
The Pound and South African Rand have both been weakening, and this could continue unless upcoming data or news boosts the outlooks for these currencies.
Next week’s economic calendar will be a little quieter, but there is still key data on the way which could inspire currency movement.
The biggest data of the week will be Britain’s final Q4 2020 growth rate report, due Wednesday. Other upcoming UK data, such as business investment on Wednesday and manufacturing PMI data on Thursday, will also be closely watched.
South African data due for publication includes business confidence on Monday, trade balance on Wednesday and manufacturing PMI on Thursday.
Sterling may lack the drive to sustain a stronger advance unless UK data impresses investors. However, as South African Reserve Bank (SARB) rate hate speculation softens, the Rand may struggle without its own good news.
Strong South African data or an optimistic development in South Africa’s coronavirus situation may be necessary for the Pound South African Rand (GBP/ZAR) exchange rate to see further losses.