As top ratings agencies adopted very different attitudes regarding the outlook of South Africa and the UK, the Pound to Rand exchange rate was up 0.57 per cent on Monday.
The GBP to ZAR pairing surged at the tail end of last week as the odds of a Bank of England rate increase occurring this year climbed and South Africa’s prolonged mining strike kept the Rand under pressure.
The Rand also posted widespread declines in response to the news that both Standard & Poor’s and Fitch (major ratings agencies) negatively revised their outlooks for South Africa. While Fitch took SA’s outlook from stable to negative, S&P’s actually cut the nation’s credit rating to BBB-.
The move, while expected, prompted a drop in the Rand. S&P’s issued the following statement with their decision; ‘While South Africa’s fiscal out-turn has held up so far, the fiscal stance over the next few years may become exposed to lower-than-expected economic growth, pressures from a new round of public-sector wage negations and increased public spending needs.’
Over the last five months the strike in South Africa’s platinum mining sector has taken a real toll on the nation’s economic performance and there are concerns that the situation could worsen dramatically if the strikes aren’t resolved in the near future.
Conversely, S&P’s positively revised the UK’s outlook from negative to stable on Friday in a sign that the nation’s economic recovery is sustainable.
S&P’s was the only one of the three major ratings agency’s to maintain the UK’s top AAA credit rating.
Economic reports for South Africa are thin on the ground until Wednesday, when the nation’s inflation rate, current account and retail sales statistics will be published.
Economists have forecast that South Africa’s retail sales climbed by 0.8 per cent in April, month-on-month, after sliding by 1.4 per cent in March. On the year sales are expected to be up 2.9 per cent following the 1.0 per cent annual gain recorded the previous month.
As the week continues South Africa’s producer price index will also be of particular interest.
Investors with an interest in the Pound to Rand exchange rate will also be focusing on the UK’s consumer price index for May (which is expected to have climbed by 1.7 per cent on the year) the Bank of England meeting minutes and UK retail sales figures. It has been forecast that the level of retail sales in the UK climbed by 4.8 per cent on the year in May after dropping by 0.5 per cent on the month. A better-than-expected result would be Pound positive.
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,18.2511,
Euro,,South African Rand,14.5091,
US Dollar,,South African Rand,10.7322,
Australian Dollar,,South African Rand,10.0777,
New Zealand Dollar,,South African Rand,9.3069,
Canadian Dollar,,South African Rand,9.8254,
[/table]
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