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GBP/ZAR analysis as UK retail sales, inflation plummets

By: Invezz

The GBP/ZAR exchange rate moved sideways this week as investors reflected on the latest UK inflation, retail sales, and jobs numbers. The pair was trading at 22.80, a few points above this week’s low of 22.38. It has slumped by over 7.7% below the highest point in 2023.

UK retail sales and inflation data

The British pound has had several important catalysts this week. On Tuesday, the Office of National Statistics (ONS) unveiled the latest jobs numbers, which showed that the unemployment rate moved to 4.2%.

The most important report came out on Wednesday when the agency published encouraging inflation data. The headline Consumer Price Index (CPI) dropped to 4.6% as energy prices dropped. 

Further, the core CPI, which excludes the volatile food and energy prices, also retreated from 6.1% in September to 5.7% in October. These numbers mean that the Bank of England (BoE) is partially achieving its price-stabilizing mandate.

And on Friday, data showed that the country’s retail sales slipped once again, signaling that consumers are still struggling. The headline sales dropped by 0.3% after falling by 1.1% in the previous month.

This slowdown translated to a 2.7% YoY dive, also lower than the expected drop of 1.5% and the previous month’s 1.3%. Meanwhile, core retail sales tumbled by 0.1% and 2.4%, worse than September’s 1.3% and 1.5% retreat.

There were other events during the week. In the political arena, Rishi Sunak changed his cabinet by replacing Suella Braverman and bringing back David Cameron. In the corporate sector, there were mergers and acquisitions (M&A) as Mars acquired Hotel Chocolat. 

Further, in a statement, the Bank of England (BoE) Chief Economist warned that the bank would continue hiking rates. Besides, the yields of gilts has dropped sharply in the past few weeks.

GBP/ZAR technical analysis

GBP/ZAR chart by TradingView

The daily chart shows that the GBP to ZAR exchange rate has been in a strong bearish trend in the past few months. It has dropped below the 50-day and 200-day Exponential Moving Averages (EMA). The two averages are about to form a death cross, which is one of the most bearish signs. 

Further, the pair has dropped below the 23.6% Fibonacci Retracement level. It also formed a triple-top pattern. Therefore, the outlook for the pair is bearish, with the next key support level to watch will be the 50% retracement point at 21.77. This price is about 4.5% below the current level and is in line with my previous forecast.

The post GBP/ZAR analysis as UK retail sales, inflation plummets appeared first on Invezz

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