Pound South African Rand (GBP/ZAR) Exchange Rate Falls Despite Above-Forecast UK Retail Sales

Pound South African Rand (GBP/ZAR) Exchange Rate Slips as UK Outlook Worsens

(Updated 15: 19/08/22)

The Pound South African Rand (GBP/ZAR) exchange rate is falling following the UK retail data. Despite the figures printing above forecasts, persistent fears of an imminent UK recession likely pulled the currency pair lower.

The possibility of further load shedding in South Africa over the weekend may be limiting losses for GBP/ZAR, however. In a statement today power utility Eskom said that constraints on its generator systems could lead to power cuts being implemented at ‘short notice’.

At time of writing the GBP/ZAR exchange rate is at around 20.0725, which is down roughly 0.2% from this morning’s opening figures.

Original article continues below:

Pound South African Rand (GBP/ZAR) Exchange Rate Trends Sideways amid Gloomy UK Outlook

The Pound South African Rand (GBP/ZAR) exchange rate is trading narrowly today despite an above-forecast rise in UK retail sales. The long-term outlook for the UK economy is likely preventing major gains for the currency pair.

At time of writing the GBP/ZAR exchange rate is at around R20.0921, virtually unchanged from this morning’s opening figures.

Pound (GBP) Drops Despite Uptick in Retail Sales

The Pound (GBP) is slipping against its rivals today despite an above-forecast rise in July’s retail sales. The poor outlook for the UK economy is likely continuing to weigh on Sterling as well as a retreat in risk appetite.

A pickup in retail sales in July may be underpinning the Pound today. Online shopping promotions were highlighted as the primary motivator for the uptick despite inflation limiting unnecessary household spending.

The Office for National Statistics (ONS) had a gloomy long-term outlook for the sector, however.

Kien Tan, director of retail strategy at PwC, reinforced this view:

‘With the prospect of more inflation to come, the concern for retailers is that shoppers will simply have less to spend as the nights draw in.’

This along with the Bank of England’s (BoE) forecasts of a recession may be keeping Sterling on the defensive today.

Markets have also pared back their bets on more aggressive interest rate hikes from the BoE. This may also be weighing on the Pound today.

South African Rand (ZAR) Falls amid Weakness in Commodity Markets

The South African Rand (ZAR) is falling against its competitors today despite making gains against the Pound. The currency is languishing near multi-week lows after sustained falls in recent weeks.

A downturn to commodity prices is likely weighing on the Rand today as well as a risk-off trading sentiment.

Strength in the US Dollar may also be weighing on the Rand. The prospect of further interest rate hikes from the Federal Reserve has placed pressure on the South African economy.

Further power outages across the country could also be prompting losses in ZAR today. Power utility Eskom was forced to implement stage 2 load shedding in Thursday due to generator failures.

GBP/ZAR Exchange Rate Forecast: Will UK Services Sector Continue to Struggle?

Looking ahead to next week for Sterling, the latest service PMI on Tuesday could cause movement in the currency. A second consecutive month of downturns could cause the Pound to fall.

Thursday’s distributive trades data could also push the currency lower if they print as forecast. After today’s retail sales figures, a downbeat reading could reinforce views that the sector is struggling.

The impact of the UK’s cost-of-living crisis could also keep Sterling suppressed if the situation for households continues to worsen.

For the Rand, inflation figures on Wednesday could push the currency higher if they print as forecast. July’s inflation is predicted to climb to 7.8% which could increase bets on further rate hikes from the South African Reserve Bank (SARB).

On the other hand, a slip in July’s reading of PPI could limit any potential gains for ZAR on Thursday.

The announcement of any further load shedding measures may also weigh on the Rand in the coming week.

Gareth Monk

Contact Gareth Monk


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