Pound Sterling to Rand (GBP/ZAR) Exchange Rate Little Changed Despite Unemployment Data

July 29, 2014 - Written by Tim Boyer

STORY LINK Pound Sterling to Rand (GBP/ZAR) Exchange Rate Little Changed Despite Unemployment Data

The Pound to Rand exchange rate (GBP/ZAR) was little moved against the on Tuesday as the currency was experiencing mixed trading in a week dominated by economic data releases from elsewhere.

Earlier in the session the Pound softened against most of its major peers after tepid UK lending data suggested that the nation’s business climate was easing.

According to data released by the Bank of England, the amount of net lending by UK citizens increased by £2.5 billion last month, less than market expectations for a rise of £2.6 billion. The previous months figure was revised upwards to £3 billion from its former figure of £2.7 billion.

The data also showed that lending to businesses fell £3.4 billion in June from May, the BOE said. It’s down 3.8% in the past year, underlining the gulf between company and household lending. Loans to small- and medium-sized companies increased £235 million on the month. That’s down 2.8% on the year.

At the same time another report showed that mortgage approvals in the UK increased more than expected last month. The data allowed the Pound to edge higher as investors saw the data as a sign that the UK’s housing market picked up momentum. The rise in approvals was the first seen since the first month of the year.

Mortgage approvals increased to 67,196 in June, an increase on the upwardly revised figures for May of 62,007. The figure was also better than the 63,000 forecasted by economists. The rise was also the first increase seen since the Bank of England introduced tougher affordability tests on loans. Those measures were introduced after the Central Banks Governor; Mark Carney warned that the UK housing market was the biggest threat to the UK economic recovery.

After that report the Pound briefly ticked higher. That gain was short-lived however, as investors turned their attention to data releases due later in the work. Concerns over the UK and EU imposing new and harsher sanctions against Russia also weighed as investors are worried that the new measures would negatively impact upon the UK, Eurozone and wider global economy.

The South African Rand managed to shrug off disappointing unemployment data as investors choose to favour the news that a month long strike in the African economies metal sector has come to an end.

The data released by Statistics South Africa showed that the nation’s unemployment rate increased to 25.2% in the second quarter of the year. Manufacturers cut some 60,000 jobs whilst the mining sector cut 5,000 jobs. Farming jobs fell by 39,000 and the number of workers in the construction sector declined by 18,000. The financial services sector meanwhile saw the loss of 34,000 positions.

“The inability of the South African economy to create employment in the private sector remains acute. Job losses in manufacturing and mining are indicative of an environment where a lot of the productive sectors in the economy grapple with strike activity and above inflation wage increases,” said an economist at BNP Paribas.

Despite the disappointing report the Rand continued to receive support from the end of a month long strike by metalworkers.

The NUMSA union said that 200,000 striking members will return to work after it accepted a wage deal by employers.

GBP ZAR Update 30/07/2014

The Pound was weaker against the South African Rand as the ending of a strike in the metalworkers sector buoyed demand for the currency. The Rand is unlikely to maintain its gains however as investors expect today’s US data to come in strongly and as geopolitical concerns weigh upon the currency.

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