Pound Sterling South African Rand Exchange Rate News: GBP/ZAR Stalls as UK Manufacturing Sector Suffers Shock Contraction

GBP/ZAR Exchange Rate Muted Following UK PMI Figures

The Pound Sterling to South African Rand (GBP/ZAR) exchange rate was robbed of any momentum this morning after GBP investors were left disappointed by the UK’s latest PMI figures.

At the time of writing the GBP/ZAR exchange rate is virtually unchanged from its opening rate, having retreated from earlier highs.

Pound (GBP) Dented by Manufacturing PMI

The Pound’s (GBP) attempt to rally against the South African Rand (ZAR) were cut short this morning after GBP investors were left disappointed by the release of the UK’s latest manufacturing PMI.

According to data published by IHS Markit, the UK’s manufacturing sector fell into contraction territory last month for the first time since July 2016, with the index tumbling from 53.1 to 49.4 – well below the modest slowdown to 52 than had been forecast.

The slump in growth appears to have been partly attributed to Brexit, with factories suffering a sharp drop in new orders as companies worked through the stockpiles built up ahead of the original Brexit deadline.

Also dragging on the growth of the UK’s manufacturing sector was the fact than some clients were beginning to shift their supply chains away from the UK.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said:

‘Supply chain managers voiced their deep anxieties over Brexit’s continuing impacts as some supply chains were re-directed away from the UK resulting in a drop in total new orders for the first time since October.’

Analysts also warned that this downtrend could persist in the months to come, with a potential slowdown in the global economy and rising trade tensions likely to put further pressure on UK factories.

South African Rand (ZAR) Tempered by Trade Turmoil

Meanwhile, the South African Rand (ZAR) is off to a weak start this week as ongoing concerns over the US-China trade dispute clipped demand for the risk-sensitive currency.

The latest developments have seen Beijing continue to call out US trade policy, with Chinese Vice Commerce Secretary, Wang Shouwen blaming Washington for torpedoing a trade deal, through ‘intimidation and coercion’.

Further capping demand for the Rand was the publication of South Africa’s own manufacturing PMI, which saw factory growth contract for the fifth consecutive month in May.

GBP/ZAR Exchange Rate Forecast: Contraction in South African GDP to Dent the Rand?

Looking ahead, the Pound to South African Rand (GBP/ZAR) exchange rate may accelerate tomorrow as South Africa releases its latest GDP report.

Economists forecast that growth will have slumped from 1.4% to -1.7% in the first quarter as the country wrestled with political uncertainty and frequent blackouts caused by state electricity utility Eskom.

Meanwhile, Sterling may remain under pressure tomorrow with the publication of the UK’s construction and services PMI.

Both sectors are forecast to have remained close to stagnation last month, likely denting GBP exchange rates as – alongside the contraction in the manufacturing PMI – it looks likely that UK GDP may have stalled in May.

Matthew Andrews

Contact Matthew Andrews