The Pound has managed to appreciate slightly against the South African Rand recently, although potentially only because of a drop off in investor appeal for the latter currency.
The Rand has mainly been limited in its movement by the waning prices of nationally important precious metals.
The GBP/ZAR pairing reached a weekly exchange rate high of 21.5409.
Pound Sterling Rocked by Weak Manufacturing and Construction PMI Printings
The Pound’s gains over the week have been limited in the extreme, owing to the cumulative negative effect of two days’ worth of declining PMI results for April.
Yesterday saw the announcement of the manufacturing variant, which fell into a contraction range for the first time in three years, while today has seen the construction sector post a dip from 54.2 to 52 points; the worst result since March 2013.
Responding to the news, IHS economist Howard Archer stated that:
‘The government will be particularly disappointed to see housebuilding growth could only rise modestly in April having almost ground to a halt in March…given that it is looking to address the UK’s acute housing shortage.’
Economists from PMI compiler Markit identified the UK Referendum as possibly having a limiting effect on construction investment, which is unlikely to give any investors peace of mind as tensions over the referendum vote increase.
South African Rand Remains Soft as Political Turmoil Continues Onwards
The Rand has made few positive movements of late, having been weakened yesterday by unresolved political tensions and today by the sliding prices of precious metals.
In the former case, President Jacob Zuma is expected to introduce a Presidential budget vote into the South African Parliament today, in spite of controversial political opponent and Economic Freedom Fighters (EFF) leader Julius Malema vowing to ‘physically’ prevent Zuma from making any form of speech within the national place of power.
Elsewhere, the price of gold, platinum and copper has fallen in all three instances, further reducing the already low appeal of the Rand.
This Week’s GBP/ZAR Exchange Rate Forecast
For the remainder of the current week, the Pound Sterlin to South African Rand exchange rate movements may occur as a result of tomorrow’s UK composite and services PMI results for April, the South African standard bank PMI for April (due on the same day) and the UK local elections, which are taking place on Thursday but are unlikely to have their results announced until early Friday.
In the UK’s case, forecasts are for a drop for both PMI printings, while a dip from 47 to 46.8 is on the cards for the South African PMI.
The UK elections will be diverse, covering local seats, police and crime commissioners and the coveted position of London Mayor.
Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.
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