South African Rand to Pound Sterling (ZAR/GBP) Exchange Rate Trending Close to 3-Month High

The South African Rand (ZAR) was able to advance to its highest level in 3-months against the Pound (GBP) on Thursday as comments by the Bank of England weighed heavily upon the UK currency.

Gains for the Rand came despite the release of data, which showed that local mining production slumped yet again in June.

According to the report, South Africa’s mining production declined by -5.7% on a year on year basis, a slight improvement on the previous months figure of -6.5%. On a month on month basis the mining production dropped by -1.4%, again a slight improvement on the -3.1% seen in May.

Production in the nations mining sector has been heavily impacted by labour unrest. Since February, production has continued to fall steadily as output from mines was hit by the five-month long strike in the platinum mining sector.

The data adds to the disappointing retail sales report, which was released earlier in the month.

Despite the mining data, the Rand was able to make gains against the weakened Pound. The UK currency was weaker against all of its major peers and was at its lowest level in four months against the US Dollar.

The Pound declined after Bank of England Monetary Policy Committee Member David Miles said that the Central Bank could leave interest rates on hold for a longer period. As a result, investors pushed back their bets for an interest rate hike occurring before the end of this year.

‘It is hard to avoid the conclusion that they simply want to keep rates as low as possible for as long as possible irrespective of the outturn in economic data. I think the best way to articulate a mildly bearish Sterling view is to go short,’ said a senior currency strategist from Commerzbank AG.

Pound Sterling to South African Rand Forecast

The strength of the Rand against the Pound is likely to only last for the short term as the markets continue to digest the comments made by the Bank of England. A strong showing from UK GDP figures on Friday is likely to see Sterling claw back some of its losses.

The South African Rand meanwhile is likely to come see weakness as geopolitical concerns continue to damage market sentiment.

Tensions over the situation increased on Thursday after Russian President Vladmir Putin said that Moscow would do everything it can to end the fighting in eastern Ukraine.

Ukrainian government forces launched an assault against the city of Donestk, one of the final strongholds of pro-Russian rebels.

South African Rand to Pound Sterling (ZAR/GBP) Extends Gains

This morning showed a relatively positive result from the UK Gross Domestic Product (GDP) report compared with the plethora of negative data pertaining to the UK in the past few days. Quarter-on-quarter GDP met with the forecast figure of 0.8%, and year-on-year GDP was better-than-forecast rising to 3.2% from 3.1%.

However, the reasonable GDP growth hasn’t been particularly efficacious in terms of strengthening the Pound as traders continue to focus on faltering wage growth and a delayed interest rate hike.

The South African Rand should continue to gain given a lack of domestic data to be released. The easing geopolitical tensions surrounding the Russia-Ukraine conflict will also help to bolster the emerging market currency.

South African Rand (ZAR) Exchange Rates