Pound to Rand (GBP to ZAR) Exchange Rate Gains Today as South Africa's June HSBC PMI Lower

July 1, 2014 - Written by James Fuller

STORY LINK Pound to Rand (GBP to ZAR) Exchange Rate Gains Today as South Africa's June HSBC PMI Lower

The Pound to Rand (GBP/ZAR) exchange rate rose as positive UK data offered support and as a new round of strikes raised concerns that Africa’s most advanced economy will take a further beating from labour unrest.

It was reported that up to 200,000 Members of South Africa’s largest union the National Union of Metalworkers of South Africa (NUMSA) began strike action today as last ditch negotiations over a pay deal ended in failure. The union is demanding a pay rise of 12%, a figure that is almost double the rate of inflation. Employers offered 8% but that was rejected.

“We have a long list of demands that has been reduced because we have to be objective. Originally we had a mandate for demanding a 15% pay increase... but we have reduced that to 12%. The union has about 340,000 members in total, but only around two-thirds were planning to go on strike.

This latest strike is occurring just one week after a five month long strike in the platinum mining sector finally came to an end. Investors are rightly concerned that history could repeat itself.

There could also be a strike at South Africa’s energy production company Eskom as workers there are also unhappy over pay and conditions. The company has warned that the nation’s aging power grid cannot cope with demand and this winter there has been rolling blackouts which negatively impact upon the economy.

Despite all of these headwinds some economists see the Rand as not being too badly affected by the strike action.

“Rand volatility is on strike. There has been some talk that the Rand is struggling because of the Numsa strike... Rand moves, though, have been broadly in line with other high-risk currencies: if there is any underperformance it is marginal. The better way of describing the Rand is just to say that it has been caught up in the global market stupor. Volatility everywhere has dropped to record lows and while it took its time about it, the Rand has been caught up in the same apathy,” said RMB in a note to clients.

SA Rand Under Pressure Over Iraq and Ukraine

The Rand is under some pressure as demand for riskier assets remains under pressure from events in Iraq and Ukraine.

The situation in the Middle East took another turn for the worse today as it appears that Iraq could break apart if an announced referendum to form a new Kurdish state is passed. If a yes vote is achieved then the likelihood for further sectarian violence increases. Turkey has already ruled out the possibility of allowing the creation of such a move.

Ukraine is also spooking the markets after a ceasefire expired yesterday. Ukrainian government forces launched a full-scale assault against pro-Russian separatists. Rebel bases and strongholds were under attack from aircraft and artillery, government officials said. The 10-day ceasefire ended on Monday evening, with President Petro Poroshenko saying "criminal elements" had thwarted the chance for peace.

The Pound meanwhile made solid gains across the board after the latest Markit manufacturing PMI data showed that production increased to a seven month high last month. The U.K. manufacturing PMI improved to a seasonally adjusted 57.5 last month from a reading of 57.0 in May. Analysts had expected the index to dip to 56.8 in June. According to the index, a reading above 50.0 indicates industry expansion, below indicates contraction.

GBP/ZAR Update 02/07/2014

The Pound to Rand exchange rate strengthened on Wednesday as concerns over new labour unrest in Africa’s top economy weighed upon sentiment.

A strike by engineers is now in its second day and fears are mounting that the strike may drag on. Economists are forecasting that the strike could cost the South African economy up to R300m of GDP per day.

Rand Exchange Rates Today - Updated 20:00 GMT 03/07/2014

The Pound Sterling to South African Rand exchange rate is trading down -0.15% at 18.43028 GBP/ZAR.
The Euro to Rand exchange rate is trading down -0.42% at 14.62309 EUR/ZAR.
The US Dollar to Rand exchange rate is trading down -0.09% at 10.74536 USD/ZAR.
The South African Rand to Australian Dollar exchange rate is trading up +0.99% at 0.09954 ZAR/AUD.
The South African Rand to Canadian Dollar exchange rate is trading down -0.24% at 0.09895 ZAR/CAD.
The South African Rand to Euro exchange rate is trading up +0.41% at 0.06838 ZAR/EUR.
The South African Rand to Pound Sterling exchange rate is trading up +0.15% at 0.05426 ZAR/GBP.
The South African Rand to New Zealand Dollar exchange rate is trading up +0.26% at 0.10636 ZAR/NZD.
The South African Rand to US Dollar exchange rate is trading up +0.09% at 0.09306 ZAR/USD.

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