South African Rand (ZAR) Exchange Rate Weaker against Sterling, US Dollar
Earlier this week the South African Rand was modestly boosted against the US Dollar and Pound by the less-than-impressive US GDP report and the below forecast UK growth data.
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The emerging-market currency did dip after the publication of disappointing domestic trade data but steadied before local markets closed for a national holiday.
According to Barclays; ‘although the local trade balance deficit reading for March was larger than expected, the Rand strengthened on Wednesday afternoon in response to the broad-based Dollar weakness that accompanied the day’s softer than expected first-quarter US GDP reading’.
On Friday the Rand fluctuated modestly against the Pound after the release of UK construction data.
The Markit construction PMI remained well above the 50 mark separating growth from contraction in April but slid from 62.5 to 60.8 – economists had expected a reading of 62.2.
While the Pound pared some of its recent gains in the wake of the data release, the British asset remained buoyed ahead of next week’s Bank of England rate decision.
Although the central bank is expected to hold interest rates at record lows and leave fiscal policy unaltered, in light of April’s impressive UK employment report the central bank might be more hawkish in its policy outlook.
If that assessment proves accurate the Pound could surge against its rivals, potentially posting notable gains against peers like the Rand.
The Rand also softened against the US Dollar on Friday ahead of the publication of US non-farm payrolls data.
The highly influential employment figures caused quite a stir when they were released.
As US employment jumped by considerably more than anticipated, with the nation’s unemployment rate falling to 6.3 per cent from 6.7 per cent, the ‘Greenback’ turned bullish and the USD/ZAR pairing briefly advanced.
However, with risk appetite emboldened by the development the appeal of the Rand increased and the currency later strengthened.
While global economic developments will certainly be responsible for Rand movement next week, investors will also be looking to South Africa’s KAGISO manufacturing PMI, unemployment figures and manufacturing production report for guidance.
Given the ongoing strikes in the platinum sector, South Africa’s manufacturing figures could disappoint expectations.
The commodity-driven Rand could also fluctuate following the release of China’s non-manufacturing/composite PMI, trade data and inflation figures.
Meanwhile, Thursday’s Bank of England rate decision may trigger additional GBP/ZAR volatility.
The Rand is currently trading against the US Dollar in the region of 10.4690 and trading against the Pound in the region of 176741.