Pound South African Rand Exchange Rate Mixed as UK Inflation Fails to Impress Markets

Pound South African Rand Exchange Rate Fails to Capitalise on Rand Weakness

Investors sold the relatively risky emerging market-correlated South African Rand (ZAR) today, but the Pound South African Rand (GBP/ZAR) exchange rate has seen fairly mixed movement. The Pound (GBP) lacks the drive for further gains.

Last week saw the South African Rand’s bullishness come to an end, as GBP/ZAR was dragged from opening levels of 20.01 to briefly touch on a yearly low of 19.49.

GBP/ZAR attempted to rebound after that though, closing the week in the interbank region of 19.80. The pair continues to trend with an upside bias this week so far, but gains have been limited and the pair is currently trending close above the week’s opening levels.

UK data is likely to remain in focus for the remainder of the week, though a surprise shift in market sentiment could boost South African Rand movement again.

Pound (GBP) Exchange Rates Calm as UK Inflation Seen Unlikely to Surge

The Pound (GBP) has been struggling to capitalise on a slightly weaker South African Rand today, as the British currency lacks the drive to see further gains.

Much of the optimism in Britain’s outlook has already been priced into the Pound. As a result, today’s slightly weaker than expected UK inflation report did little to boost Pound demand.

Yearly inflation printed at 0.7% rather than the expected 0.8%. Analyst reaction to the report was mixed, with some speculating a surge in inflation was on the way, while others warned against expecting inflation to rise significantly any time soon.

South African Rand (ZAR) Exchange Rates Avoid Big Losses despite Market Risk-Aversion

The South African Rand is a currency often correlated to risk and emerging market sentiment. As a result, its recent resilient strength has been dented by a perceived rise in coronavirus infections across Asia.

However, this week’s risk-off movement has not been enough to cause big losses in the South African Rand, which is holding its ground against the Pound for now.

Today’s South African inflation rate report met expectations. Oils and fats products saw solid rises in demand, according to the report from StatsSA:

‘This is the highest rate since October 2016 for this group

Fuel prices in March 2021 were on average 2.3 percent higher than they were in March 2020. This is the first time in 12 months that fuel prices have increased on an annual basis.

In other words, for the first time in a year, motorists are now paying more on fuel than they were 12 months before.’

Pound South African Rand (GBP/ZAR) Exchange Rate Awaits UK Consumer Activity Data

Most of this week’s South African data has been published already. As a result, the South African Rand’s movement will be driven mostly by shifts in market sentiment as well as strength in rivals towards the end of the week.

As for the Pound, multiple key UK ecostats will be published through the end of the week which could influence Sterling movement if they surprise.

Thursday will see the publication of the Confederation of British Industry’s (CBI) latest retail report, as well as business optimism data.

Friday will follow with the Office for National Statistics’ (ONS) own retail sales report for the UK.

Markit will also publish UK PMI projections from April on Friday, which will give markets a better idea of how Britain’s economy is performing this month.

Of course, any late-week developments in the coronavirus pandemic or global sentiment could also influence the Pound South African Rand (GBP/ZAR) exchange rate in the coming days.