British Pound to Rand Exchange Rate Softens as GBP and ZAR Suffer Poor Economic Data

August 19, 2014 - Written by Ben Hughes

STORY LINK British Pound to Rand Exchange Rate Softens as GBP and ZAR Suffer Poor Economic Data

The Pound Sterling to Rand exchange rate (GBP/ZAR) traded lower during the mid-week session, following the release of disappointing UK CPI figures.

South Africa however appears to be facing problems with last week’s Retail Sales falling flat at 0.0% year-on-year, after economists had forecast a rise of 2.6%.

Furthermore the UK has seen Consumer Price Index figures fall lower than anticipated at 1.6%, after economists predicted a 1.8% figure.

The latest ZAR forex rates are as follows:

- The Pound Sterling to Rand exchange rate is trading down 0.28% per cent at 17.69130 GBP/ZAR.
- The Euro to Rand exchange rate is trading up 0.05% per cent at 14.18127 EUR/ZAR.
- The US Dollar to Rand exchange rate is trading up 0.35 per cent at 10.64660 USD/ZAR.

The UK has been surrounded in speculation regarding the feasibility of interest rate hikes, and Tuesday’s figure has backed the Bank of England in their dovish views toward slack in the British economy. Economist Samuel Tombs commented: ‘The MPC can afford to leave monetary policy quite loose while inflation pressures are extremely weak. We continue to expect the committee to be surprised by inflations weakness over the coming months.’ With the release of the Bank of England’s meeting minutes on Wednesday, the Pound could see some strength placed back into it if the central bank proves encouraging for the UK economic expansion.

South African Economy Health Fears following Strike Action in 2014

The South African Rand however, slipped lower in the currency market following the poor retail figures last week, after an already tumultuous year of strike action harming the South African economy. Furthermore, Moody’s credit rating agency have recently downgraded the South African banking institution, ‘Capitec Bank’, from a D+ to a D, as confidence wanes in South African consumer lending. However, the Reserve Bank of South Africa has disagreed stating: ‘While the bank respects the independent opinion of rating agencies, we do not agree with the rationale given in taking this step. The Moody’s statement justifies the rating action further on the basis that Capitec follows a similar business model to African Bank. This is incorrect, the two lenders do not share the same business model.’

However the South African economy was rumoured during the strikes to be on the verge of facing recession if the strike action continued to drain South Africa of the ability to grow. Future South African data releases will demonstrate the effects of the latest metal workers work stoppage. Furthermore Capitec’s Financial Director, Andre du Plessis, commented: ‘Capitec Bank does not agree with the downgrade and would like to place on record that the business is healthy, growing according to plan, and its loan book is performing within its risk appetite.’

The Current Trajectory for the Pound and the South African Rand Ex

For now, the current Pound to Rand exchange rate will remain fairly soft; however the Pound is placed in a position that may enable it to rally if the Bank of England encourages support.

The Rand however will await Inflation Rate figures published on Wednesday in an attempt to determine the health of the South African economy. July’s Inflation Rate numbers are expected to attain 6.08%, in comparison to June’s 6.6%.

The Pound Sterling however will see fluctuation from Retail Sales publishing on Thursday, alongside Public Finances and Public Sector Net Borrowing figures.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Currency Predictions Daily Currency Updates Poun Forecasts