Poor data and continued political unease in the UK pushed Pound Sterling lower against the South African Rand last week.
By the time trading ended on Friday, the GBP/ZAR exchange rate had fallen by a total of -1.3%.
PMI Disappointment and Tory Party Fears Weigh on Pound Sterling
The Pound spent much of last week on the decline; a movement triggered by Monday’s worse-than-expected manufacturing PMI from Markit.
September’s manufacturing index was expected to weaken from a downwardly-revised 56.7 to 56.2, but it instead dropped to 55.9.
Tuesday’s construction PMI performed even worse, falling unexpectedly from 51.1 and ending up in contraction territory with a score of 48.1.
Hopes weren’t high for Wednesday’s services and composite indices, but these both bettered forecasts.
However, with the data overall pointing to GDP growth of just 0.3% in the third quarter, there was little for markets to get excited about.
A fairly underwhelming Conservative Party Conference, which did nothing to build confidence in the unity of the government, kept investors largely gloomy until the end of the week.
Rand Manages to Shake Off Disappointing Ecostats Thanks to Pound Weakness
The South African Rand was able to rise against the Pound during the first half of last week. While gains eased back by the end of the week, GBP/ZAR was still left lower than its starting levels.
The data calendar offered few releases and the results of those were mixed, but the weakness in the Pound left the door open for the Rand to advance.
Tuesday’s ABSA manufacturing PMI rose from 44 to 44.9, which was not only still firmly in contraction territory, but also over one point lower than the forecast result.
Wednesday’s Standard Bank PMI was similarly disappointing, weakening from 49.8 to 48.5.
However, Thursday’s SACCI business confidence index for September provided some good news after rising from 89.6 to 93.
Pound Weakens as UK Trade Deficit Hits Highest Level on Record
Today the Pound Sterling to South African Rand exchange rate is weakening following the release of disappointing trade data.
The UK’s visible trade deficit widened to a record high of -£14.24 billion in August after a 4.2% surge in imports and a -0.7% contraction in exports, against hopes that weak Pound Sterling exchange rates would boost overseas orders.
This has taken the shine off today’s industrial, manufacturing and construction data, despite the figures showing much-better-than-expected production and output growth during August.
GBP/ZAR Pairing to Trend Sideways as Markets Await Thursday BoE Surveys?
The UK data calendar has fallen quiet until Thursday, where the week’s final economic release will be the Bank of England’s (BoE) credit conditions and bank liabilities surveys.
If these find that the UK’s financial system remains weak, the Pound could fall on fears the BoE believes economic conditions are not supportive of tighter monetary policy.
South Africa’s data calendar is also quiet until Thursday, when mining and gold production figures will be released.
Considering mineral exports and manufacturing are key to the South African economy, strong production figures would support the Rand higher, while weakness here could sour the economic outlook and consequently demand for ZAR.