The Pound to Rand exchange rate began the week in a rather upbeat position, having gained 0.28 per cent as a result of UK developments.
Although emerging market assets like the Rand did benefit from the European Central Bank’s decision to introduce additional stimulus measures at last Thursday’s policy meeting, the Rand trimmed these gains over the weekend and was softer against several of its major rivals on Monday.
The Pound was boosted after the International Monetary Fund admitted that its projections for UK growth had been off and that it had judged the nation’s austerity programme too harshly. The IMF’s Managing Director Christine Lagarde held her hands up during an interview with the BBC and stated; ‘We got it wrong’.
Speaking of current UK policy Lagarde commented; ‘The mixture between tax and spending cuts is something that we regard as fairly balanced and at the right mix. We don’t see a massive increase in tax as recommendable at the moment’.
Further Sterling strength was enabled by an upbeat Lloyds employment confidence report for the UK.
The index advanced from 1 in April and 4 in May.
The Rand meanwhile was feeling the heat ahead of the release of some influential domestic economic reports.
The South African asset began the week in a fairly steady position against the US Dollar and Pound, but the expectation that tomorrow’s domestic manufacturing production data will disappoint expectations pressured the Rand.
South Africa’s manufacturing production and business confidence reports are both due out on Tuesday, with the nation’s mining output report following on Thursday.
As the country’s platinum mining sector has been involved in a prolonged strike for months this week’s data is expected to reflect South Africa’s fairly dismal growth outlook and could cause further softening in the local currency.
Another factor keeping the Rand trading lower is speculation that top ratings agencies Standard & Poor’s and Fitch will downgrade South Africa’s credit rating on Friday.
In the view of a currency analyst with the Rand Merchant Bank; ‘The Rand is doing better again but an empty data calendar should keep it moving sideways mostly until Friday’s likely fireworks from the sovereign ratings actions. While credit ratings are often seen as a lagging indicator, the local mood is such that [negative] moves would be taken quite badly.’
Tomorrow GBP to ZAR movement could be triggered by the British Retail Consortium’s like-for-like sales figures.
An annual sales gain of 1.6 per cent has been forecast. The UK’s industrial and manufacturing production reports will also be of particular interest.
South African Rand (ZAR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,South African Rand,17.7850,
Euro,,South African Rand,14.4328,
US Dollar,,South African Rand,10.5823,
Australian Dollar,,South African Rand,9.8758,
New Zealand Dollar,,South African Rand,8.9964,
Canadian Dollar,,South African Rand,9.7907,
[/table]
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