South African Rand (ZAR) weaker against Pound (GBP) and falls to one-month low against US Dollar (USD)

The South African Rand weakened against the Pound and US Dollar on Monday as the currency continues to be under pressure from last week’s trade deficit data and the ongoing four-month long strike in the platinum mining sector.

The sell-off of the Rand began last Friday following the release of trade deficit data. According to the South African Revenue Service report the nations deficit widened from R11.39 billion in March to R13.03 billion in April.

A separate report also indicated that private sector credit demand had slackened to 8.27% year-on-year in April from a revised 8.73% in March, reflecting an overall weakness in emerging markets.

Due to the data and the ongoing issues in the nations mining sector the Rand halted its four day run of making gains and the strength it has enjoyed since the end of January.

The strike is now the longest running in South African history and has dragged the nation back to the brink of recession. The dispute was one of the main causes for the first contraction of South African GDP since 2009.

“Technically, the Rand has broken out of the well-documented corrective down-channel. There is scope now for more weakness towards the next area of importance,” said Warrick Butler from Standard Bank.

The Rand is likely to remain weak throughout the week as Central Bank rate decisions from both the Bank of England and European Central Bank are due on Thursday.

The ECB is widely expected to cut interest rates to a new record low and introduce new monetary easing measures in an effort to reduce the threat from deflation and bolster the Eurozone economy.

As Europe is one of South Africa’s biggest trading partners we can expect the Rand to follow the Euro weaker as Thursday approaches.

South African Rand (ZAR) Exchange Rates