Pound to Rand (GBP/ZAR) Exchange Rate Still up 0.4% as Strike Rumbles on

While the Pound softened slightly against the US Dollar on Monday, the Pound to Rand (GBP/ZAR) exchange rate continued to enjoy an elevated position.

With the appeal of the emerging-market Rand dented by the prospect of a US interest rate increase and persistent instability in the South African employment sector, the Pound was able to hold last week’s advance against its peer.

South African economic reports were lacking on Monday, but as wage negotiations broke down last week it appears likely that the metal workers’ strike will continue for the foreseeable future.
The recently ended platinum sector strike ran on for five months and had a considerable, detrimental impact on the South African economy.

Investors will be hoping that the current strike in the metal sector won’t drag on as long.

Last week the US Non-Farm Payrolls report showed that the US economy added considerably more positions than anticipated in June, and that the unemployment rate dropped from 6.3% to 6.1% rather than staying on hold (as expected).

Up until now the Federal Reserve has been keen to remind investors of its commitment to keeping interest rates on hold, but as this sign of improvement in the US labour market could give the central bank a reason to reassess its stance, emerging market assets like the Rand came under pressure after the data was published.

This week US news will also be the main driving force behind Rand movement.

In the view of Barclay’s Africa; ‘The balance of risk favours a weaker Rand over the coming days.’

However, according to Rand Merchant Bank (RMB); ‘Moves, though, are limited by the lack of direction from offshore after Friday’s US holiday and by the lack of event risk – only Wednesday and Thursday see anything that could shake up the markets.’

The data they refer to includes the publication of minutes from the latest Federal Open Market Committee policy meeting and domestic manufacturing/mining figures.

Of course, as the Rand is a commodity-driven asset, China’s latest inflation and trade figures will also be of note.

The Pound to Rand (GBP/ZAR) exchange rate could also fluctuate in response to UK developments, such as tomorrow’s mining/manufacturing production figures, the GBP estimate for June compiled by the National Institute of Economic and Social Research and the Bank of England’s interest rate decision.