Pound to South African Rand Exchange Rate Tumbling on UK Data and Trade Hopes
Despite UK election hopes and mixed US-China trade relations, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate slumped today. The losses came as Britain’s latest PMI projections showed disappointing contractions.
After opening this week at the interbank level of 18.98, GBP/ZAR spent most of the week trending higher due to UK election hopes and US-China trade jitters. On Tuesday, GBP/ZAR touched on a weekly high of 19.21.
However, GBP/ZAR has weakened towards the end of the week. At the time of writing today, GBP/ZAR was slumping into low levels not seen since early-November. The pair is trending near the interbank level of 18.81.
UK election and US-China trade developments remain highly influential for the Pound to South African Rand exchange rate going forward.
Pound (GBP) Exchange Rates Keep Tumbling as UK PMIs Reveal Surprise Contractions
Today marks the first publication of Markit’s UK PMI projection print, ahead of the finalised PMIs typically published at the end of the month.
Markit’s first projection print for Britain doesn’t exactly come at a time of strong economic performance, though. Britain’s manufacturing and services projections fell short of forecasts, both showing contractions.
Manufacturing slowed to 48.3 rather than the expected 49, and services failed to print at the expected stagnant 50.0, instead contracting at 48.6.
This marked the lowest PMI in Britain’s key services sector since the aftermath of the 2016 Brexit vote. Overall it indicated the worst run for Britain’s PMIs since the global recession a decade ago.
According to Chris Williamson, IHS Markit’s Chief Business Economist:
‘A worsening jobs market has the potential to feed through to weaker consumer spending and slower wage growth, thereby undermining two of the key supports to the economy in recent months. The big question will be just how long can the Bank of England hold its nerve in keeping policy unchanged.’
South African Rand (ZAR) Exchange Rates Benefit from US-China Trade Hopes
Despite a lack of particularly solid domestic support for the South African Rand (ZAR) this week, the risk and trade-correlated currency saw a jump in demand today and was able to benefit against a weak Pound (GBP).
This was due largely to global trade speculation, amid hopes that the US and China would continue to work to reach a preliminary trade deal of sorts sooner rather than later.
Most of the week has seen speculation that US-China trade relations were worsening, so the latest speculation has been positive for trade-correlated currencies.
Still, analysts warn that relations could still be up in the air due to the US Senate passing a bill to support Hong Kong protestors. According to Teeuwe Mevissen, Senior Market Economist at Rabobank:
‘Market expectations (are) that a ‘phase one’ deal is still a very real possibility,
But having said that, it remains to be seen what China’s reaction will be to the Senate bill regarding the situation in Hong Kong. That will put negotiations under pressure and make them more complicated.’
Pound to South African Rand (GBP/ZAR) Exchange Rate Remain Focused on Politics and Trade
While the Pound (GBP) outlook was a little shocked by UK PMI projections today, the British currency’s outlook remains heavily focused on politics looking forward.
Britain’s anticipated 2019 General Election is now just about three weeks away. For now, markets expect a comfortable win for the ruling Conservative Party.
This expectation could keep the Pound buoyed due to hopes it will lead to a relatively soft Brexit outcome. However, this also means that signs of a narrower or different election outcome could push the Pound lower.
As a result, investors will continue to keep a close eye on UK election polls, as well.
South African Rand (ZAR) movement, on the other hand, will be driven by global trade developments, particularly in regards to the US-China trade war, due to a lack of major South African data due next week.
If the US and China edge closer to reaching a ‘phase one’ trade deal, the Pound to South African Rand (GBP/ZAR) exchange rate could be in for fresh losses.