Pound to South African Rand (GBP/ZAR) Buoyed as Risk-Aversion Returns, USD/ZAR Stronger

With Ukraine referendum tensions resulting in a risk-off environment, the Pound was able to strengthen against a struggling emerging-market Rand on Monday.

As the Rand tracks the Euro, the fact that the common currency has come under serious pressure since the European Central Bank’s policy statement also pushed the Rand lower.

South Africa’s currency began the week in a softer position against the Pound, US Dollar and Euro.

While last week’s calm and orderly local election helped the Rand advance, the currency has since shed much of its gains.

According to Barclays Africa; ‘Given that tensions in Ukraine are becoming more violent and more regions of the country have voted in favour of becoming part of Russia, the Rand and other emerging market currencies could fall victim to heightened risk aversion.’

The Pound’s stronger position against the Rand was also the result of the lingering impact of last week’s upbeat UK services and manufacturing reports.

Today’s Lloyd’s employment confidence report also showed improvement, with the index advancing from -2 to 1.

Over the next few days there are two major South African reports to be aware of – the nation’s mining production figures and retail sales data.

In February mining production fell by 7.0 per cent month-on-month and 4.8 per cent year-on-year.

As the platinum sector strike continues, the odds of the figures confirming that another decline occurred in March are high.
In March South African retail sales slumped by 0.2 per cent from February so investors will be hoping for a rebound.

However, fluctuations in the GBP to ZAR pairing are also likely to occur as a result of the UK’s highly-anticipated employment figures.

If the British economy adds the positions expected in the three months to March, driving the domestic unemployment rate from 6.9 per cent to 6.8 per cent, considerable Sterling gains could occur.

Other UK data to be aware of this week includes the Bank of England’s inflation report.

While the British Retail Consortium’s like-for-like sales figures are due out later day, they aren’t likely to inspire notable currency market movement.