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Pound South African Rand (GBP/ZAR) Exchange Rate Soars as South African Retail Figures Drop

February 13, 2019 - Written by John Cameron

GBP/ZAR Exchange Rate Climbs Above 1% as South African Retail Sales Plummets

The Pound South African Rand (GBP/ZAR) exchange rate soared to over 1% today and is currently trading around R17.9354 on the inter-bank market.

Sterling (GBP) gained on the South African Rand (ZAR) today following the publication of South African retail sales figures for December, which fell considerably below expectation by -1.4% - their first slump in nearly 2 years.

ZAR traders have remained unmoved by the recent news from the French oil firm, Total, who recently made a discovery of ‘gas condensate’ off the South Coast of Africa – with a reported estimation of over 500 million barrels of oil being made available.

Stephen Larkin, a CEO at Africa New Energies, commented:

‘Southern Africa has just become the hottest destination for hydrocarbon exploration in the world… A ‘giant discovery’ is defined as more than 500 million barrels of oil equivalent…'

'This is by a country mile the largest that has been found. For every barrel of oil geologists find, petroleum engineers find another seven…’

The South African Rand has continued to struggle today after yesterday’s printing of the South African manufacturing production index figures for December, which fell to a worse-than-expected 0.1%.

GBP/ZAR Exchange Rate Rises despite Disappointing CPI Figures

The Pound, meanwhile, took a hit from the publication of the UK CPI figures for January, which fell below expectation to 1.8% – which is below the Bank of England’s 2% inflation target.

Howard Archer, the Chief Economic Adviser to the EY Item Club, commented:

‘If there is a no-deal UK exit from the EU at the end of March, the inflation outlook will be clouded by a number of factors – most notably what happens to sterling, how well the economy holds up and what tariffs come into effect.’

‘Our suspicion is that inflation will spike significantly higher if the UK leaves the EU without a deal.’

These were followed by the release of the UK retail price index figures for January, which also fell by a worse-than-expected -0.9%.

Meanwhile in Brexit news, Prime Minister Theresa May has come under pressure after rumours that Olly Robbins, the Chief Brexit Negotiation, was overheard in Brussels discussing a possible extension to Article 50 should her deal be rejected in Parliament.

This has caused some GBP traders to become optimistic, seeing the possible extension as reducing the likelihood of a chaotic Brexit, and potentially heightening the possibility of a second-referendum.

GBP/ZAR Forecast: ZAR could Gain if Chinese Economy Shows Signs of Recovery

Sterling investors will be looking ahead to the release of the UK RICS house price balance figures for January tomorrow, which are expected to decrease.

There are no further significant South African economic data releases this week, however with China being a close trading partner, many ZAR investors will be looking to tomorrow’s printing of the Chinese trade balance figures for January for any signs of an increase, and any indicators that China’s economy is improving.

The GBP/ZAR exchange rate will likely be driven by political discussions during the rest of this week, with Brexit in the driving seat as Theresa May once again rallies to gain parliamentary support as pressures mount as the leaving date draws nearer.

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