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Pound to South African Rand (GBP/ZAR) Exchange Rate Steady as South African Retail Sales Fall More Than Expected

September 16, 2020 - Written by John Cameron

GBP/ZAR Exchange Rate Rangebound as Covid-19 Vaccine Hopes Buoy Rand

The Pound to South African Rand (GBP/ZAR) exchange rate held steady today, with the pairing currently fluctuating around R21.208.

The South African Rand (ZAR) failed to rise against Sterling today following a worse-than-expected South African Retail Sales report for June. The figure slumped below consensus by -9% and exacerbated concerns for the nation’s struggling economy.

Analysts at Reuters commented on the data:

‘South Africa’s retail sales fell more than expected in July as the slump triggered by the strict coronavirus lockdown continued to weigh, data showed on Wednesday, with sales of general retailers and of food and clothing the hardest hit.’

However, the South African Rand (ZAR) managed to remain relatively steady because of growing hopes for a Covid-19 vaccine. As a result, this has boosted the demand for risky assets like ZAR.

Added to this, China’s economic recovery has provided a boost to the risk-averse South African currency.

Furthermore, with China being one of South Africa’s largest trading partners, this has brightened the overall economic outlook for the nation’s delicate economy.

Pound (GBP) Steady as No-Deal Brexit Risk Weighs on Sterling

The Pound (GBP) held steady against the South African Rand (ZAR) today following the release of the UK Consumer Price Index figure for August, which rose by 0.9% year-on-year. Consequently, Sterling has benefited from signs of a slow recovery of activity in the UK economy.

Thomas Pugh, UK economist at Capital Economics, was cautious, however, saying:

‘The big picture is that it will be a few years before the economy is strong enough to sustain CPI inflation at the 2% target.’

‘The big risk to this view is a no-deal Brexit, which could cause a slump in the pound and, in turn, a temporary sharp rise in inflation to above 3.5%.’

Meanwhile, concerns over Brexit continue to haunt UK markets. Following Monday’s vote on the controversial Brexit Internal Market Bill – which won by 77 votes – investors are worried that the UK could be heading for a no-deal on December 31st.

Any further signs of UK-EU relations souring, however, would drag down the GBP/ZAR exchange rate.

GBP/ZAR Forecast: Could a Dovish BoE Drag Down Sterling Tomorrow?

Pound (GBP) investors will be looking ahead to the Bank of England’s interest rate decision. However, the Bank is expected to hold its rate at 0.1%.

Nevertheless, if the BoE is notably dovish in its outlook for the British economy, then would see Sterling suffer.

South African Rand (ZAR) traders will also be awaiting tomorrow’s interest rate decision from the South African Reserve Bank (SARB). Any signs of a downbeat assessment for South Africa’s economy would prove ZAR-negative.

The GBP/ZAR exchange rate will continue to be driven by Brexit developments over the course of the week. As a result, Sterling could fall if the likelihood of a no-deal Brexit continues to haunt UK markets.

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