As a new week of trading began the GBP/ZAR exchange rate edged lower, with losses largely stemming from the fact that UK manufacturing has clearly fallen into contraction.
Rand demand, meanwhile, has been slightly higher owing to mounting hopes that the increasingly unpopular ANC party may lose its grip on the country in this week’s South African municipal elections.
Over the course of last week, the Pound progressively fell against the Rand, dropping from a starting high of 18.9531 to a closing low in the area of 18.3344.
Pound Sterling Slumps on Alarming Picture for UK Economy Post-‘Brexit’
Sterling slumped on Monday as the Markit/CIPS manufacturing PMI for July fell from 52.1 to 48.2, lower than the initial estimate.
While July’s PMI flash had been pessimistic to start with, this evident drop into the sub-50 contraction range was a worse outcome than expected and sent the Pound diving to 18.2138 against the Rand.
With the August Bank of England (BoE) interest rate decision also due to take place this week, the Pound’s outlook is likely to remain negative.
South African Rand Climbs with ANC Party’s Grip Forecast to Weaken
Confidence in the South African Rand has been exceptionally high of late, thanks in no small part to expectations for a dramatic shift in the nation’s political makeup after Wednesday’s municipal elections.
At the time of writing, forecasts had been for the currently dominant African National Congress (ANC) party to take under 60% of the total vote. While not indicative of a decisive victory for the opposition Democratic Alliance (DA) group, this result would still deplete the ANC’s current power.
The ANC has been increasingly criticised over the years, with a recurrent objection being to the presence of Jacob Zuma as the nation’s President; Zuma has repeatedly been accused of corruption and political incompetence, especially when it comes to the appointment of finance ministers.
In domestic news, the Barclays manufacturing PMI has fallen from 53.7 to 52.5, although forecasts had been for a 52.3 figure.
GBP/ZAR Exchange Rate Forecast
Over the next few days, Pound Sterling/South African Rand exchange rate movement may occur as a result of tomorrow’s UK construction PMI. The South African standard bank PMI is also out on Tuesday, while Wednesday sees the publication of the UK services PMI and Thursday brings the hotly anticipated Bank of England (BoE) interest rate decision.
Economists have forecast a decline in the UK’s two remaining PMIs for July and a cut in the national interest rate from 0.5% to 0.25%. If the BoE should unveil additional stimulus measures, the Pound could experience a decided downtrend.
For South Africa’s bank PMI, a decline from 49.6 to 49.4 is expected.