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GBP ZAR Exchange Rate Surges on Surprise UK Unemployment Rate Drop

May 17, 2017 - Written by James Fuller

The Pound’s significant gains against the Rand come after a mixed UK data release, which brought historically positive and negative results.

On the supportive side, UK unemployment in March dropped from 4.7% to 4.6%, bettering forecasts for no movement. This put unemployment at a historic low, while the percentage of employed persons has been the best on record.

Commenting on the news was Resolution Foundation official Stephen Clarke;

’Britain kicked off the year with another welcome record on employment, and another big fall in unemployment. This welcome jobs boost will provide a much needed boost to family incomes’.

On the other hand, UK wage growth has been distinctly disappointing, with a non-bonus rise to 2.1% in April leaving average earnings under the 2.7% inflation rate recorded on Tuesday.

This puts UK ‘real’ incomes in danger of a wage squeeze, which can have a knock-on effect for UK retail activity. Clarke’s analysis has also focused on this;

‘The good news on jobs is not feeding through to positive news on pay growth, which turned negative at the start of the year and looks set to remain below inflation throughout most of 2017. Coming so soon after the big post-crisis pay squeeze, this new phase of falling pay means that this decade is set to be the worst in over 200 years for pay packets’.

Given how strong the GBP ZAR exchange rate has been today, traders have clearly been more focused on the unemployment rate result; whether this optimism persists remains to be seen.

The Pound could hold onto its gains against the Rand on Thursday, when UK retail sales figures come out. Covering sales with and without fuel in April, gains are forecast across the board which could trigger another GBP ZAR advance.

Recent South African news has seen monthly retail sales slow in March, although annual sales have risen from -1.6% to 0.8% over the same period.

The price of gold has recently skyrocketed due to instability in the US, but this has failed to enable a Rand to Pound rise.

The Rand has recently slipped against the Pound due to uncertainty about President Jacob Zuma’s links to the Gupta family.

The latest news has seen former Mining Minister Ngoako Ramatlhodi claim that he was forced to blackmail mining giant Glencore. This was supposedly done to benefit the Gupta family, one that has previously been tied to Zuma on a number of occasions.

While the news could theoretically lead to Zuma’s downfall in South African politics, the Rand’s weakness shows that traders remain sceptical.

There is no remaining South African data out this week, so the Rand could instead be influenced by any surprise gold price movements.

The ongoing Trump scandal shows no signs of fading anytime soon, so it is possible that steady rises in gold prices will be enough to trigger a ZAR GBP rally.
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