Pound to South African Rand (GBP/ZAR) Exchange Rate at a three-day high

Pound to South African Rand exchange rate chart

The Pound climbed to its best level in three days against the South African Rand as the conflict in Iraq spooked investors away from the higher yielding emerging market currencies.

Sterling made gains across the board on Thursday and managed to push back above key levels against the Euro and US Dollar after economists said that today’s Bank of England measures to tackle the overheating UK property market would not negatively impact the UK’s economic recovery.

“Sterling gained some support because the measures are in line with indications we got from Carney that the FPC’s approach would be slow and gradual. It’s not going to have an impact on monetary policy and rate-hike expectations are going to remain in place,” said the head of European Currency Strategy at Morgan Stanley.

Domestic data showed that producer price inflation in South Africa slowed unexpectedly in May. PPI dropped from April’s figure of 8.8% to 8.7%. Economists had been expecting PPI to increase to 9%. On a month-over-month basis, producer prices rose 0.2 percent, less than the consensus estimate for a 0.6 percent increase.

The Rand also fell along with the majority of other peers after the BoE report but was under pressure from continued risk aversion as a result of the conflict in Iraq.

The rapid advance of militants led by the Islamic State in Iraq and the Levant (ISIL) continued today as news broke that they had captured a town just an hour’s drive away from the capital city of Baghdad.

As the progress of the Jihadists shows no signs of being slowed by an ineffectual Iraqi army the nation’s government has said that it will hold a session of parliament in order to try and form a new united government, something that the international community hopes will make the fight back against ISIL more effective.

Concerns that the conflict was escalating also weighed upon demand for perceived riskier assets. Iraqi Prime Minister Nouri Maliki said that he welcomed air strikes against ISIL positions launched by Syria.

With ISIS threatening both nations this latest bout of fighting could bring Iraq and the Syrian government closer as allies in their fight against ISIL.

Iran too looks like it could send further help as a checkpoint on its western border was attacked.

Against the US Dollar the Rand also fell despite the US currency being weakened by yesterday’s worse-than-forecast GDP data and as data released today also came in below expectations.

The US Commerce Department said that consumer spending in the world’s largest economy rose less than forecast in April.

It rose just 0.2% which was below the hoped for figure of 0.4%. A separate report released by the Labour Department showed that the number of US citizens initially filing for unemployment benefits slipped only slightly last week.

In the week ending 14th of June Continuing claims meanwhile increased to 2.571 million from 2.559 million.

South African Rand (ZAR) Exchange Rates