GBP/ZAR Exchange Rate Steady as UK Unemployment Unchanged
The Pound to South African Rand (GBP/ZAR) exchange rate is trading in a narrow range today, after the UK’s latest jobs report revealed unemployment remained steady in May.
At the time of writing the GBP/ZAR exchange rate is trading at around ZAR20.8962, virtually unchanged from this morning’s opening rate.
True Extent of Unemployment Crisis Faces Challenge to the Pound (GBP)
The Pound (GBP) is broadly holding its ground so far today, as investors respond to the UK’s stronger-than-expected jobs report.
According to data published by the Office for National Statistics (ONS), the UK unemployment rate held steady at 3.9% in May, beating forecasts it would rise to 4.2%.
The accompanying earnings figures also beat forecasts in May, with wage growth shrinking 0.3% against forecasts it could contract as much as 0.7%.
While the headline figures appear supportive of Sterling, analysts warn they do not show the true extent of the unemployment crisis facing the UK economy.
This is because of the way that furloughed staff currently count as ‘employed’ despite expectations that huge swathes of workers face redundancy in the coming months as the government’s jobs retention scheme begins to wind down.
James Smith, Developed Markets Economist at ING, warns:
‘Unfortunately, there’s little doubt that unemployment will rise over the coming months. The gradual unwinding of the job retention scheme over the summer is being seen as a potential catalyst for firms to begin making changes.’
Should unemployment spike in the second half of 2020 as suspected then it’s likely to threaten any chances of a V-shaped recovery in the UK economy.
South African Rand (ZAR) Subdued on Weak PPI Figures
At the same time, the South African Rand (ZAR) is struggling to find momentum today, in the wake of South Africa’s latest producer price index.
May’s PPI figures revealed that producer prices continued to contract as a result of the coronavirus lockdown, stoking concerns over the depths of the recession facing South Africa.
This has added to concerns over the country’s coronavirus outbreak as the number of confirmed cases passed 300,000 overnight on Wednesday, to become the eighth most affected country globally.
This is stoking concerns that South Africa’s lockdown will need to be extended, with President Cyril Ramaphosa branding the pandemic the ‘greatest crisis in the history of our democracy’.
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