Pound to Rand Exchange Rate Forecast - GBP ZAR Stronger, Markets Eye UK Employment Today

July 5, 2014 - Written by Frank Davies

STORY LINK Pound to Rand Exchange Rate Forecast - GBP ZAR Stronger, Markets Eye UK Employment Today

The British Pound to South African Rand (GBP/ZAR) exchange rate spent most of the week higher as the South African currency was weighed upon by concerns over strike action taking place in the nation’s engineering and metal working sectors.

The strike action began on July 1st after 220,000 metalworkers from NUMSA downed tools in a pay dispute heightening investor worries that the unrest ridden economy will see a repeat of the recently ended 20-week long strike in the platinum mining sector.

The latest foreign exchange market levels (07/07/2014 09:30 GMT) are as follows:

- The Pound to Rand exchange rate is is trading up 0.54% at 18.55300 GBP/ZAR.
- The Euro to Rand exchange rate is trading up 0.62% at 14.70960 EUR/ZAR.
- The South African Rand to Dollar exchange rate is trading down 0.6% at 0.09239 ZAR/USD.

About 30% of contract workers haven’t reported for work at the sites since the strike started, Andrew Etzinger, a spokesperson for Eskom Holdings, which provides about 95% of South Africa’s electricity, said in an interview.

Tensions rose on Thursday after South African police fired rubber bullets in order to disperse striking workers who had been blocking the entrance to the construction site of a much needed power station.

"A few hundred workers were blocking one of the entrances to Medupi power plant and we had to use rubber bullets to disperse them," police spokeswoman Ronel Otto said, adding the situation had been contained by the afternoon. As a result worries over South Africa’s power grid were raised as the nation’s aging power grid has seen rolling blackouts affect the economy.
Police used rubber bullets to disperse the crowds.

The workers are demanding salary increases of between 12 and 15%, but bosses are offering only an 8% rise.

SA Currency Finds Support as Strikes Look to End Soon

South Africa’s economy shrank by half a percentage point in the first quarter of the year due to strikes. The latest strike is estimated to cost the economy a minimum of $30 million or R300 million per day.
On Friday the Rand found some support early in the session after it appeared that the striking union was close to meeting terms with employers. Those hopes were dashed later in the session as the union rejected a new offer made by employers.

The currency was also brought under pressure by Moody’s Credit Services who warned that South Africa’s credit rating is at risk if the strikes drag on. Labour unrest has heavily impacted upon the country’s economy and recently saw South Africa knocked off of the top spot for being the African continents largest economy.

‘Continued weak investment, exports and overall growth will pose serious challenges to the government’s efforts to rein in its budget deficit and stabilise its debt metrics, a credit negative for the economically troubled economy,” Moody’s said.

Since November 2011 Moody’s has had a negative outlook on South Africa’s Baa1 credit rating. That’s two levels above Standard & Poor’s, which downgraded the nation’s debt on June 13 to BBB-, the lowest investment grade level.

The strikes are making it difficult for South Africa to take advantage of a recovery in growth in its main trading partners, such as Europe, Moody’s said. Earlier in the week South African Finance Minister Nhlanhla Nene said that the economy will probably miss the government’s 2.7% growth target this year because of the stoppages.

What's Forecast for the SA Rand?

Next week sees the publication of the South African manufacturing production data for May. Economists are expecting the data to show a decline from the previous the month as the strikes affect production.

GBP/ZAR Update 07/07/2014

The South African metal workers strike is keeping the Rand under pressure and the Pound to Rand (GBP/ZAR) exchange rate begins the week 0.46% stronger.

Today’s UK Lloyds Employment Confidence report could have a modest impact on the GBP/ZAR pairing. Over the next five days the South African reports to be aware of include Mining Production and Manufacturing Production.

Next week the South African Reserve Bank will gather to deliver its latest interest rate decision.

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