Hopes of political change in South Africa boosted the Rand yesterday, with GBP ZAR unable to recover losses today.
Pound Turbulent After BoE ‘Super Thursday’ Disappointment
Tuesday’s UK manufacturing PMI raised hopes of a third-quarter economic rebound after beating expectations to rise from 54.2 to 55.1.
Strong demand for export orders, thanks to the depreciation in Sterling following the referendum, helped drive growth.
Wednesday’s construction PMI didn’t follow suit, however, slumping from 54.8 to 51.9. Because construction is a small part of the UK economy markets weren’t overly perturbed.
‘Super Thursday’ saw a better-than-expected service PMI overlooked due to pessimism from the Bank of England (BoE).
The monetary policy meeting saw just two members of the Monetary Policy Committee (MPC) vote in favour of hiking rates. Chief Economist Andy Haldane didn’t back raising borrowing costs, despite some confident comments made in July.
Additionally, the latest iteration of the Inflation Report saw forecasts for GDP and wage growth cut.
GBP ZAR is today stuck at opening levels as investors await the latest vote of no confidence in President Jacob Zuma and digest weak UK retail sales figures.
Data from the British Retail Consortium showed that rising food prices pushed sales up in terms of cost rather than volume, while sales of non-essential items fell as consumers cut back to cope with higher grocery bills.
Rand Unable to Capitalise on Pound Weakness as Zuma Faces another Vote of No Confidence
South Africa’s manufacturing sector contraction worsened in July, according to the ABSA PMI released last Tuesday. The index fell from 46.7 to 42.9, instead of climbing back into growth territory as forecast.
Thursday’s Standard Bank PMI rose out of contraction territory, but fell short of expectations by clocking in at 50.1 instead of 50.6.
Yesterday’s unemployment rate performed marginally better-than-predicted, holding at 27.7% – or 6.1 million persons out of work – rather than ticking higher. However, this is hardly a positive figure given the scope of South Africa’s joblessness problem.
Political developments have also weighed on the South African Rand and prevented it from taking advantage of the Pound’s weakness.
Embattled President Jacob Zuma faces yet another challenge to his leadership, with a vote of no-confidence due to be held today.
His ANC party controls Parliament with a majority of 249, which has previously kept him insulated from the opposition’s attempts to remove him.
However, there is growing unrest within his own party and this ballot will be held in secret, meaning many ANC members could choose to vote against him as they know they are safe from backlash should Zuma survive the challenge to his leadership.
Hopes that the controversial President will finally be ousted boosted the Rand at the beginning of this week, pushing the GBP ZAR exchange rate down to a weekly low.
GBP ZAR Forecast; Will Zuma Survive another Attack on His Leadership?
Thursday is the only day left this week with any UK data on the calendar, but the volume of releases makes up for several quiet days. Industrial, manufacturing and construction output data is followed by trade balance figures and the National Institute for Economic and Social Research (NIESR) GDP estimate for July.
Data from South Africa isn’t due until the end of the week. Thursday sees the release of gold, mining and manufacturing production statistics, while consumer confidence figures for the third quarter follow on Friday.
Political developments are more likely to cause turbulence for GBP ZAR exchange rates, however, depending upon the outcome of today’s vote of no confidence in President Zuma.