The USD/ZAR and GBP/ZAR exchange rates moved sideways this week after Soth Africa published strong inflation data on Wednesday. The USD/ZAR was trading at 18.04, which was 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 lower than the year-to-date high of 23.02.
South Africa’s inflation soars
The main South Africa forex news this week was the latest consumer inflation data. According to the South African statistics agency, the country’s headline consumer price index (CPI) jumped for the second straight month.
Inflation rose to 7.1% on a year-on-year basis as food prices surged. That increase was bigger than the median estimate of 7.0%. It was also bigger than the South Africa Reserve Bank (SARB) target range of between 4% and 6.0%
The biggest driver of inflation was food and non-alcoholic prices whose prices jumped by 14%, the highest level in over 14 years. Therefore, these numbers mean that SARB will likely continue tightening in the coming months. It surprised with a 50 basis point increase in March.
Inflation remains high in the UK and the US. Last week, data from the US showed that core inflation rose from 5.6% in February to 5.7% in March. The 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 recent hawkish Bank of England stance, The 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 the headline retai sales dropped by 3.1% in March while core sales fell by 3.1%.
GBP/ZAR price analysis
GBP/ZAR chart by TradingView
The daily chart shows that the GBP to ZAR exchange rate has been bullish in the past few months. It recently moved above the important resistance point at 21.78, the highest point in November and December 2021. Most 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 likelihood that the pair will soar to the key resistance point at 25 in the coming months. In the same period, the USD/ZAR will likely jump to a high of 18.72.
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