Pound to South African Rand softens as Greece Worries Ease

May 27, 2015 - Written by Admin

STORY LINK Pound to South African Rand softens as Greece Worries Ease

Pound to South African Rand softens as Greece Worries Ease

The Pound Sterling to South African Rand exchange rate softened but remained trading close to a multi-week high as concerns that Greece will default on its repayment to the International Monetary Fund were eased by Greek officials. As South Africa’s economy is closely linked to Europe, any easing in worries and signs of improvement in the Eurozone often lends support to the South African Rand.

‘Today’s focus for forex markets shifts towards discussions between Greek officials and their creditors in Brussels. Any impasse on that front is likely to be US Dollar supportive and a threat to risky assets such as the Rand,’ said Barclays Africa in a note to clients.

Despite the slight improvement in sentiment, the South African Rand remains under heavy pressure from the release of economic data released in the preceding session. Unemployment in Africa’s most developed economy was shown to have risen to its highest level in 11-years and economic expansion was shown to have slowed in the first quarter of 2015.

Unemployment in the nation rose to 26.4%, the highest seen since 2003 and was a sharp increase from the 24.3% rate seen in the final quarter of 2014. The report means that there are 5.5 million South Africans struggling to find work. The expanded unemployment rate, which takes into account people who are actively and not actively looking for work, increased by 1.5 percentage points to 36.1% — implying that 8.7-million people who were able to work were not in employment.

A lack of jobs was the main driver for the xenophobic riots, which affected parts of the nation earlier in the year. A further rise in the unemployment rate does not bode well for the future as civil unrest could return.
Data also showed that South Africa’s economic growth rate slowed dramatically in the first quarter of 2015 as drought, civil unrest and rolling power outages affected output. According to Statistics South Africa, the economy expanded by 1.3% in the first three months of the year, a sharp slowdown from the 4.1% growth rate recorded previously.

The main contributors to the increase in economic activity for the first quarter of 2015 were the mining and quarrying industry (which contributed 0.8% based on growth of 10.2%), finance, real estate and business services (which contributed 0.7% based on growth of 3.8%).
Manufacturing slowed dramatically and agricultural output plummeted due to drought.

Investors will now focus on the Queen’s speech to parliament for direction. The speech will outline the Conservative government’s plans for the coming parliamentary session.

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