The Pound to Rand Exchange Rate strengthened on Wednesday as a strike by South Africa’s largest union weighed upon investor sentiment towards the Rand.
A strike by 220,000 members of the National Union of Metalworkers of South Africa (Numsa) entered its second day after wage negotiations failed.
Investors are growing concerned that this latest bout of labour unrest could drag on for an extended period of time.
The Rand tumbled against the US Dollar and other safe haven currencies after wage negotiations broke down after the union said that it would revert to a higher wage demand after talks with employers collapsed.
Concerns over South Africa’s power supply also increased as the strike disrupted construction at two much needed power stations.
Rolling blackouts caused by South Africa’s aging power grid has negatively impacted upon the South African economy.
“The industrial action will not be resolved quickly given Numsa’s political motivations for striking- it is not just about wages,” NKC Independent Economists said in a note to markets. The strike is expected to cost the South African economy up to R300 million per day in GDP.
The Rand was also weakened after the nation’s Finance Minister Nhlanhla Nene said that he expects the South African economy will miss this year’s growth target of 2.7% as the impacts of the recently ended five-month long platinum miners’ strike caused the economy to contract in the first quarter of the year.
The Pound meanwhile continued to find support from yesterday’s positive manufacturing PMI data and is likely to make further gains against the Rand if today’s UK construction data comes in strongly and if consumer confidence data out of South Africa disappoints.
UPDATED 23:30 GMT 02 July, 2014
Pound to Rand (GBP/ZAR) Exchange Rate Stronger on Wednesday
During the European session the Pound surged against peers like the Rand in response to encouraging construction figures for the UK.
The Pound to Rand (GBP/ZAR) exchange rate held these gains even after a consumer confidence report from South Africa surprised to the upside.
The Consumer Confidence gauge jumped to a two and a half year high in the second quarter of the year.
While this was good news, one economist with FNB did point out that ‘low and middle income earners are suffering the brunt of the impact of South Africa’s high unemployment rate, lost income during strikes, the slump in unsecured lending and high fuel and food prices.’
The UK Services PMI could trigger further Pound to Rand (GBP/ZAR) movement on Thursday.
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,18.3143 ,
Euro,,South African Rand,14.6010 ,
US Dollar,,South African Rand,10.6950 ,
Australian Dollar,,South African Rand,10.1047 ,
[/table]
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