British Pound to South African Rand (GBP/ZAR) Exchange Rate Dips after SA Retail Sales Report
After advancing on Tuesday in response to positive UK inflation data, the British Pound to South African Rand (GBP/ZAR) exchange rate continued to trade above 18.30 following the release of the UK’s employment report.
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Although the Pound shed 0.24% against the Rand after average wage growth in the UK was shown to have stagnated, the news that the nation’s unemployment rate fell to a 5 ½ year low did lend the British asset some support.
The Rand, meanwhile, remained under pressure as the strike in South Africa’s metalworking sector continued.
According to recent reports, the National Union of Metalworkers of South Africa (NUMSA) are sticking to their guns and have vetoed the latest pay offer from the employers organisation.
NUMSA are demanding a 10% annual pay rise over three years and argued that the offer (which would have seen pay increased by 10% in 2014, 9.5% in 2015 and 9% in 2016) just wasn’t good enough.
The five month long strike in the platinum sector (which only recently ended) had an incredibly detrimental impact on South Africa’s economic performance and investors are afraid that this strike could add to the issues if it drags on for much longer.
In the opinion of Kaizer Nuatsumba; ‘We have now done everything that we could have possibly done to end the strike.’
While the Rand was able to hold its ground slightly against Sterling as investors processed the UK’s mixed employment figures, the South African asset was struggling against the US Dollar.
Yesterday’s comments from Fed Chairwoman Janet Yellen (regarding the prospect of interest rates being increased sooner than currently expected) increased the appeal of the ‘Greenback’ while piling pressure on emerging-market assets like the Rand.
However, as Wednesday progressed the Rand strengthened against both the Pound and US Dollar thanks to a surprisingly strong retail sales report for South Africa.
The data showed that retail sales in the nation increased by 2.4% in May on a year-on-year basis. This was a stronger result than investors anticipated and was an improvement on the 2.1% sales growth recorded in April.
Sales were up 0.8% on the month in May – the fastest pace of monthly expansion since December last year.
As the North American session got underway the US Dollar also fluctuated in response to below-forecast US reports.
US Industrial Production was shown to have increased by 0.2% on the month in June, less than the 0.3% gain expected and down from an rise of 0.5% in May.
Similarly, Manufacturing Production rose by 0.1% in June, month-on-month. This followed a negatively revised increase of 0.4% in May and was below the 0.3% forecast.
Tomorrow’s South African Reserve Bank interest rate decision could have a considerable impact on the British Pound to Rand (GBP/ZAR) exchange rate.
The South African Rand is currently trading against the US Dollar in the region of 10.6780 and trading against the British Pound in the region of 18.2792.