South African rand still in trouble By Invezz.com

Invezz.com – Exchange rates moved sideways this week after South Africa released strong inflation data on Wednesday. USD/ZAR was trading at 18.04, a few points below the year-to-date high of 18.72. On the other hand, the GBP to ZAR exchange rate was trading at 22.44, a few points below the year-to-date high of 23.02.

South African inflation soars

South Africa’s top forex news this week was the latest consumer inflation data. According to South Africa’s statistics agency, the country’s general consumer price index (CPI) increased for the second consecutive month.

Inflation rose to 7.1% year-on-year due to rising food prices. That increase was greater than the median estimate of 7.0%. It was also higher than the South African Reserve Bank’s (SARB) target range of between 4% and 6.0%.

The biggest driver of inflation was the prices of food and non-alcoholic beverages, whose prices rose 14%, the highest level in more than 14 years. Therefore, these numbers mean that SARB is likely to continue to tighten in the coming months. It surprised with an increase of 50 basis points in March.

Inflation remains high in the UK and the US. US data last week showed core inflation rising from 5.6% in February to 5.7% in March. Headline inflation fell to 5.0%, the lowest level since 2021.

In the UK, the situation is a bit worse. On Wednesday, data revealed that inflation remained in the double-digit area even after the Bank of England’s recent hawkish stance. Headline inflation jumped to 10.1% in March.

The next key catalyst for the GBP/ZAR exchange rate will be the upcoming UK retail sales scheduled for Friday. Economists expect the data to show that core retail sales fell 3.1% in March, while core sales fell 3.1%.

GBP/ZAR Price Analysis

TradingView GBP/ZAR chart

The daily chart shows that the GBP to ZAR exchange rate has been bullish in recent months. It recently moved above the important resistance point at 21.78, the highest point in November and December 2021. More importantly, it retested this price, which is usually a sign of a bullish continuation.

The GBP/ZAR price has also moved above the 50-day and 25-day moving averages and has invalidated the important double top pattern. Therefore, there is a possibility that the pair will reach the key resistance point at 25 in the coming months. In the same period, USD/ZAR is likely to jump to a high of 18.72.

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This article was originally published by Invezz.com