Foreign Currency Market Update – GBP / ZAR Update
Both the Pound Sterling and US Dollar were able to climb by around a percent against the South African Rand on Monday ahead of a heavy few weeks for South African data. Last week had seen the Pound Sterling to South African Rand (GBP/ZAR) exchange rate climb after a mixed bag of SA ecostats came to light. South African Gross Domestic Product (GDP) came in at 2.1% on the year in quarter one, rising from the previous 1.3% reading. Meanwhile, South African Unemployment hit an 11-year high in Q1 when it rose from 24.3% to 26.4%.
Several factors have contributed to rising levels of joblessness and a slowdown in economic growth such as drought and frequent power outages. Rolling blackouts have caused the mining and manufacturing industries to lessen their output while many citizens have lost power in their homes several times a week. Drought has been a major dampener on the agricultural industry as crop production struggles.
Over the next couple of weeks, South Africa will release a slew of domestic data while the US publishes key indicators which could encourage Federal Reserve interest rate hike speculation. As a result, the US Dollar to South African Rand (USD/ZAR) exchange rate is trading near a five-week high. The most influential releases for the US Dollar this week will be Friday’s Change in Non-Farm Payrolls and Unemployment Rate stats. The Federal Reserve has previously stressed the importance a strong labour market would have on policymaking decisions regarding interest rate hikes and any upbeat data from the US could enable the US Dollar to rally.
Friday will also see credit ratings agency Fitch disclose its latest ratings update on the South African economy. This is likely to cause some major Rand exchange rate fluctuations if the rating is negatively revised as economists’ have forecast. South Africa’s April credit growth figure picked up pace, reaching 9.35%, while the M3 Money Supply measure climbed by 8.38%. Monday has seen the release of the KAGISO South African Manufacturing Purchasing Managers Index (PMI) which came in at 50.8 in May, up from the previous month’s 45.4. Any figure above the 50.0 benchmark denotes growth, whereas below indicates contraction. The Pound Sterling to South African Rand (GBP/ZAR) exchange rate may experience some movement this week from the Bank of England’s (BoE) interest rate decision and 12-month inflation forecast, out on Thursday and Friday respectively. Next week, South African Business Confidence, Mining Production and Manufacturing Production stats are all due out and are likely to cause some South African Rand market movement.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is trading at 18.7090. The US Dollar to South African Rand (USD/ZAR) exchange rate is trending in the region of 12.2772
Heads Up
Summary of major upcoming data releases that we think may move the market.