GBP EUR Rate Gains On Eurozone Banker Bonus Cap, GBP ZAR Rate Spirals On Weak SA Trade Data

Published: Friday, 1 March 2013 09:00 BST - Written by John Cameron

STORY LINK GBP EUR Rate Gains On Eurozone Banker Bonus Cap, GBP ZAR Rate Spirals On Weak SA Trade Data

Sterling climbed against the euro during yesterday’s session, sending the Pound euro exchange rate (currency : GBP EUR) back above the 1.1600 level just after the European equities close.

The move out of euro-denominated assets was partly driven by German and eurozone inflation data, released yesterday, which revealed that the rate of price rises is cooling in the region, leaving the door open for a near-term interest rate cut by the European Central Bank.

However, negative sentiment towards the single currency was also driven by Wednesday night’s provisional deal between EU policymakers to introduce a cap on the level of bonuses paid to investment bankers. The agreement sets a maximum level of bonus at 100% of each individual banker’s salary, whilst providing the scope to up this to 200% if the said bank’s shareholders consent.

The news caused analysts to predict a eurozone-wide brain-drain, with the brightest financial minds exiting Europe’s money markets in order to seek more lucrative employment in the US and the Far East. At a time when mainland Europe is struggling to avoid a full-scale economic depression, the news from Brussels was far from welcome.

Elsewhere, the South African Rand slumped against all of the other sixteen most-actively traded currencies yesterday afternoon thanks to the release of domestic trade figures which revealed that the nation’s trade deficit had ballooned to a record ZAR24.53bn last month. This represented a huge leap upwards from December’s counterpart figure of ZAR2.70bn. The official numbers suggest that the South African economy is beginning to feel the effects of the loss of output which the widespread strikes of recent months in its mining and extraction sectors have caused. The Pound to Rand exchange rate (currency : GBP ZAR) was trading up by 2.37% on the day at London’s equities close last night. There could be additional upside to come for the pair as today progresses.

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