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Pound to Rand Exchange Rate Forecast: GBP/ZAR Lower on South Africa Interest Rate Decision

July 20, 2014 - Written by Toni Johnson

The Pound to Rand (GBP/ZAR) exchange rate today continued Friday's negative trend as a lack of market moving UK data spurred investors to partake in a round of profit taking. As a result Sterling fell against the majority of its most traded exchange rate peers.

Sterling remained under pressure from investor profit taking and concerns over the potential impacts upon the UK economy if Scotland votes for independence in September’s referendum. Nationalist support cut the pro-Unionists poll lead to 9% with two months left to go. Some economists are forecasting that the Pound could drop by as much as 10% in the event of Scotland leaving the Union.

The South African Rand had been weakened early in the session as demand for riskier emerging market currencies was affected by geopolitical concerns. The now suspected shooting down of a Malaysian passenger plane over eastern Ukraine saw investors run to the safety of currencies such as the Japanese Yen and Swiss Franc. The plane went down with all 298 passengers on board. None survived the crash. The incident heightened the stakes between the Kiev based pro-Western government and pro-Russian rebels, both of whom blamed the other for the attack.

The crash came a day after the USA and European Union announced a fresh new round of sanctions against Russia, following the annexation of Crimea in April and ongoing tensions in the rest of Ukraine. The U.S. package was the largest round of penalties so far. The new sanctions are targeted at a number of prominent Russian companies and could send the nation into recession. The West has accused Russia with providing heavy weapons to the separatist rebels in eastern Ukraine and it seems increasingly likely that it was a Russian provided anti-aircraft missile launcher that brought down flight MH-17.

Markets were also jittery after Israel announced late Thursday the start of a ground campaign in Gaza after 10 days of aerial and naval bombardments failed to stop Palestinian rocket attacks. Concerns over the situation in the Middle East caused oil prices to rise which in turn aided commodity based economies such as Canada and South Africa. The situation in Israel escalated further on Friday after Israeli Prime Minister Benjamin Netanyahu said the Israeli military was prepared to significantly widen its ground offensive against Palestinian militants.

Concerns over the geopolitical situation eased later in Friday’s session as the markets deemed that the downing of MH-17 would not cause too much instability in the financial markets. As a result demand for riskier assets improved and added to Thursday’s gains for the Rand after the nation’s central bank opted to raise interest rates by a more than expected level.

The South African Reserve Bank (Sarb) raised interest rates by 25 basis points to 5.75% in an attempt to tackle the risks posed by high inflation.

Also offering support to the Rand was news that the National Union of Metalworkers of South Africa said that it was planning to reduce its wage demands and agree to a two-year pay deal. Negotiations between the strikers and employers were overseen by government representatives. Hopes were rising that an end to the 18-day long strike could be over by the end of today.

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“We are not far from each other; it’s only 0.5% difference in the second year. We are very flexible. Talks could continue about what to agree for the third year,” said Numsa general secretary Irvin Jim.

Current Rand Exchange Rates - 14:00 GMT 21st July 2014



The Pound to Rand exchange rate is trading down -0.34% at 18.15024 GBP/ZAR.
The Euro to Rand exchange rate is trading down -0.32% at 14.37430 EUR/ZAR.
The US Dollar to Rand exchange rate is trading down -0.26% at 10.63015 USD/ZAR.
The South African Rand to Euro exchange rate is trading up +0.32% at 0.06957 ZAR/EUR.
The South African Rand to Pound Sterling exchange rate is trading up +0.35% at 0.05510 ZAR/GBP.
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