Pound to Rand Exchange Rate Today - GBP ZAR Falls on Above Forecast South African Inflation

July 22, 2014 - Written by Ben Hughes

STORY LINK Pound to Rand Exchange Rate Today - GBP ZAR Falls on Above Forecast South African Inflation

The Pound to South African Rand exchange rate on Tuesday as sentiment towards riskier assets improved and as optimism increased that a three-week long strike in South Africa’s metals and engineering industries may be resolved by the end of this week. The current GBP ZAR currently stands 0.66 per cent lower today at 17.92859.

Sentiment towards riskier emerging market currencies improved as investors deemed the events in Ukraine and the Middle East not yet a big threat to the global economy although that could change later in the session if the European Union agree on introducing harsher sanctions upon Russia for its involvement in the shooting down of a passenger over the eastern part of Ukraine last week.

Heavy fighting in the eastern Ukrainian city of Donetsk and clashes in Gaza and the wider Middle East caused investors to keep a wary eye on geopolitical events.

Sterling came under some pressure earlier in the session after data showed that the UK’s public finances posted a bigger than forecast deficit in June. According to the data released by the Office for National Statistics the nation’s deficit widened to £11.38 billion last month and was below the £10.66 billion expected by investors.

The Rand was finding support from hopes that a three-week long wage strike by some 220,000 workers in South Africa could be resolved by the end of the week.

“We are hopeful that the strike is going to be over by the end of this week, from our point of view, discussions between unions and employers went well,” said Thembinkosi Mkalipi, the acting deputy director general for industrial relations at South Africa’s Labour Department.

Against the US Dollar the Rand fell after a report showed that US consumer prices rose in June. The increase in inflation raised expectations that the Federal Reserve will raise interest rates sooner than expected.

According to the Labour Department its Consumer Price Index increased by 0.3% last month, with petrol sales accounting for up to two-thirds of the gains recorded, the data adds to May’s increase of 0.4%. The data widely matched economist forecasts.

“Inflation at least for the moment isn’t a problem. We had a little bit of a scare, a minute of worry for a while there, but it’s basically going away,” said the chief economist at IHS Inc.

The ‘Greenback’ also found support as a result of the inflation data and the publication of a positive House Price Index report. Prices in the US increased by 0.4% in May, up from April’s figure of 0.0%.

“More evidence of higher inflation in the US would be seen as positive for the US Dollar as long as it leads to a pickup in short-term US yields. If higher inflation persists, it will challenge Yellen’s dovish view that this is just a temporary phenomenon. The contrast is becoming more notable between ECB and Fed policy,” said a forex strategist.

Following the data releases the US Dollar advanced to an 8-month high against the Euro. The single currency was weaker against the majority of its most traded peers as the monetary policy of the European Central Bank diverges from those in the UK and US.

GBP/ZAR Update 23/07/2014

The South African Rand held onto gains against the Pound and other peers on Wednesday as the currency benefited from the rather benign inflation data out of the USA and as hopes remain that striking metal workers will reach a wage deal with employers by the end of this week.

Update 24/07/2014

The Rand to Pound exchange rate was holding onto gains and other major peers on Thursday after data released in Wednesday’s session showed that the nation’s inflation rate remained at 6.6% last month, the figure was higher the South African Central Bank’s target for a third consecutive month. Also offering support to the currency was the relatively benign data out of the USA and UK. The Pound could strengthen if Thursday’s retail sales data come in better than forecast.

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