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Pound Mixed against South African Rand on ?Brexit? Worries

June 9, 2015 - Written by Ben Hughes

Pound Mixed against South African Rand on ‘Brexit’ Worries



The Pound Sterling to South African Rand exchange rate experienced mixed movement as concerns over the impact of a potential British exit from the European Union (EU). Earlier in the week credit ratings agency Moody’s warned that the nation’s credit rating could be downgraded if the British people voted in favour of leaving the EU. That negative view was adding to by the recruitment agency Manpower. The firm warned that a ‘Brexit’ would lead to a large amount of uncertainty and instability for employers.

‘Our position on Europe is clear: leaving the EU would threaten jobs and harm Britain’s prospects. At a time when we face serious skills shortages in key areas of the economy, that an EU exit could have a very negative effect on our economic health,’ said Manpower Solutions UK managing director James Hick.

Also putting pressure on the Pound Sterling was news that HSBC was slashing 8,000 jobs in the UK and suggested that it could move its headquarters abroad to Hong Kong. Further losses for the Pound were held in check by a report which showed that the UK’s trade deficit narrowed by a bigger than forecast in April.

Earlier in the session the South African Rand was weaker as weak public sector wage pressures threatened to scupper the currency’s recovery from its recent 13-1/2 year lows. Strike action has been threatened by public sector workers if wages do not improve. Such a strike would have severe negative consequences for the nation’s economy. South Africa's public sector minister said on Monday a new pay deal for public servants would increase the government's wage bill from 412.7 billion rand to 466.8 billion rand ($37 billion) over three years, reviving concerns about the Treasury's ability to put a lid on spending. Fears that South Africa’s credit rating could be cut on Friday was also weighing.

The South African Rand managed to firm however as optimism increased that a deal will be reached between Greece and its international creditors. The European Commission confirmed that it received a new proposal from Greek officials. Greek Prime Minister Alexis Tsipras has been adamant that a deal will only be reached if the creditors agree to drop their demands to cut pensions.

The standoff has raised concerns that Greece could leave the Eurozone. Tsipras warned that a ‘Grexit’ would be the beginning of the end for the single currency.

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