The Pound was up 0.40 per cent against the South African Rand on Tuesday as a result of several South African developments.
Firstly, Gill Marcus (Governor of the South African Reserve Bank) weakened the Rand by asserting that the economic outlook for emerging markets was in a delicate balance.
During a speech in Johannesburg Marcus asserted that the South African economy will just about sidestep entering a recession by posting modest growth in the second quarter.
However, she did also comment on the negative impact of the ongoing mining strike, asserting; ‘The longer the strike continues, the sooner the adverse effects on exports will be felt. It behoves all of us government, business, and labour to rebuild the confidence and trust that is an imperative to change the negative trajectory that the economy is presently on.’
Marcus added; ‘Even if a settlement were achieved today and workers returned to work soon thereafter, it would take weeks for normal operations to resume. It is also possible that a number of shafts will never re-open.’
The Rand broadly softened in response to these remarks.
Further Rand fluctuations occurred as the level of manufacturing production in South Africa was shown to have contracted by 1.5 per cent in April, year-on-year, following revised growth of 1.0 per cent in March. A 0.5 per cent increase had been expected. This marked the first annual drop since September of last year.
The report detailed a 13.2 per cent plunge in the level of motor vehicle manufacturing as well as a 5.3 per cent fall in petroleum and chemical manufacturing.
However, April’s overall month-on-month surge in manufacturing production of 3.5 per cent wiped out the previous month’s 1.9 per cent decline.
Meanwhile a measure of South African business confidence remained low, with the measure holding at 41 points in the second quarter from the first. Manufacturing sentiment fell to its lowest levels since 2009.
The report saw one economist with the Rand Merchant Bank comment; ‘Of the services sector, coupled with agriculture and construction more or less maintain their first quarter growth momentum, a return to more normal conditions in the platinum industry would give the economy a kicker in the second half of the year’.
At the same time the Pound was enjoying moderate support as a result of the UK’s own impressive industrial production data. Annual industrial and manufacturing production in the UK was shown to have jumped to its strongest level since 2011.
Tomorrow volatility in the Pound to Rand exchange rate could be occasioned by the UK’s employment data. A strong jobs gain for Britain could help the Pound climb further.
Additional fluctuations could take place on Friday as South Africa’s mining production data is released. Given the ongoing strike, a steep decline in output is expected.
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,17.9696,
Euro,,South African Rand,14.4930,
US Dollar,,South African Rand,10.7143,
Australian Dollar,,South African Rand,10.0355,
New Zealand Dollar,,South African Rand,9.0204,
Canadian Dollar,,South African Rand,9.7119,
[/table]
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