Pound to Rand (GBP/ZAR) Exchange Rate 0.30% Lower after SA Data

The Pound is trading at its highest level since January against the South Rand and is forecast to make further gains as the week progresses as concerns over the strength over the South African weigh heavily.

At 17:00pm GMT South African President Jacob Zuma is due to deliver a key note speech which will be watched closely by investors. Economists are hoping that Mr Zuma will offer viable solutions to the nation’s economic problems such as the record long miners’ strike, power cuts and Friday’s double credit rating downgrade.

An end to the 20-week long miners’ strike could come to an end as the world’s three largest platinum companies and the nation’s biggest union continue talks in an attempt to end the impasse.

“President Zuma needs to acknowledge the economic difficulties facing the nation that confidence has fallen across the board and the economy is noticeably weaker. This is the time to start to rebuild with a view to restoring confidence,” said an economist based in Johannesburg in a phone interview with Bloomberg.

The Rand is expected to fall further on Wednesday as South African retail sales, inflation rate and current account are all expected to fall.

The Reserve Bank’s quarterly report also due on Wednesday could deal another blow to the Rand. Economists are widely expecting the data to show that South Africa’s current account deficit widened to 6.1% of GDP in the first quarter from 5.1%.

Sterling meanwhile could find support from the release of retail sales data.

Pound to South African Rand – Updated 09:25 GMT on 18/06/2014

After recouping some losses yesterday following President Jacob Zuma’s rallying speech, the Rand put in a mixed performance on Wednesday as investors digested several influential economic reports for South Africa.

Zuma hoped to restore confidence among investors by pledging to significantly reduce the nation’s whopping unemployment rate over the next six years, but given that South Africa’s credit outlook was so recently revised to negative, any positive impact his assertions had on the Rand was limited.

Today’s South African inflation data showed that consumer prices rose by 0.2 per cent on the month and 6.6 per cent on the year – a slightly larger annual increase than the 6.5 per cent forecast.

Economists also expected that the domestic current account report would show that the deficit swelled from 5.1 per cent of GDP to 6.1 per cent of GDP, keeping pressure on the Rand. However, the deficit actually narrowed in the first quarter of the year in spite of the prolonged strike in South Africa’s platinum mining sector. The deficit eased to 4.5 per cent of GDP.
The Rand remained 0.30 per cent lower against the Pound in the immediate aftermath of the reports’ publication.

As the day continues movement in the GBP to ZAR exchange rate will also be caused by minutes from the latest BoE policy meeting and South Africa’s retail sales report (out at 12:00 GMT). Hawkish minutes or a strong retail sales gain could trigger Pound to Rand volatility.