Forecast-Beating UK PMIs Help Pound to South African Rand (GBP/ZAR) Exchange Rate to Hold Ground

Pound to South African Rand Exchange Rate Avoids Losses as Rand Rebound Fizzles

Earlier in the week, investors opted to buy the South African Rand (ZAR) back from its cheapest levels, but the Pound Sterling to South African Rand (GBP/ZAR) exchange rate ultimately avoided losses. This was due to a broadly strong Pound (GBP).

Since opening this week at the interbank level of 18.82, GBP/ZAR spent the week trending with an upside bias.

GBP/ZAR touched on a monthly best of 18.97 earlier in the week. While the pair was unable to hold its best levels, it remained just above the week’s opening levels at the time of writing today.

Investors continued to find the Pound appealing today. Anticipation for next week’s Bank of England (BoE) policy decision could prevent Sterling from seeing much notable movement in the coming sessions.

Pound (GBP) Exchange Rates Sturdy as Bank of England (BoE) Rate Cut Bets Lighten

The Pound (GBP) has seen strong movement this week. Today’s UK PMI projections from January seem likely to help the currency to hold most of its weekly gains.

Britain’s January PMI projections beat expectations slightly in all prints. Services jumped from 50 to 52.9, helping to push the composite figure up to 52.4.

The manufacturing projection still printed a contraction of 49.8, but this was still better than analysts expected.

According to Chris Williamson, Chief Business Economist at IHS Markit:

‘It seems likely that the rise in the PMI kills off the prospect of an imminent rate cut by the Bank of England, with policymakers taking a wait and see approach as they assess the performance of the economy in the post-Brexit environment.’

However, while the data beat expectations and further softened BoE interest rate cut bets, some investors had been hoping for a stronger rebound in the data.

The data still showing some signs of weakness means there is still uncertainty over the tone the BoE will take. For now, Pound investors look ahead to next week’s BoE decision.

South African Rand (ZAR) Exchange Rates Fail to Sustain Rebound Attempt

Earlier in the week, investors bought the South African Rand (ZAR) back from its cheapest levels. It followed weeks of losses for the currency.

The risk and trade-correlated Rand enjoyed a brief strong rebound. This was due to a brief rise in market demand for currencies correlated to risk, amid signs that the global outlook was improving.

However, the Rand was unable to sustain those gains. This week’s risk-on movement was very brief, as markets became more anxious about a coronavirus spreading from China.

The latest risk-aversion, combined with lasting concerns about South Africa’s currently poor economic outlook, meant that the Rand will end the week without sustaining its rebound attempt.

Pound to South African Rand (GBP/ZAR) Exchange Rate Outlook Depends on Bank of England (BoE) Decision

Both the South African Rand (ZAR) and Pound (GBP) enjoying surges in demand over the past week. However, the Pound to South African Rand (GBP/ZAR) exchange rate ultimately trended near the week’s opening levels, as the week drew to an end.

The latest UK PMI data hasn’t given the Pound much additional support. This week’s rally meant that a BoE rate cut next week was already largely priced out.

Still, lingering uncertainty over the tone the BoE will take in reaction to recent data means that the bank’s policy decision next week is still the biggest event on the horizon for GBP/ZAR investors.

Next week’s economic calendar will be quiet. There are very few notable UK or South African ecostats due.

The Bank of England’s January policy decision on Thursday will be carefully watched, for the bank’s reaction to recent UK data. If the bank is notably more optimistic about an economic rebound, Sterling see a fresh surge.

On top of BoE news, market risk-sentiment will remain a focus for GBP/ZAR investors. If coronavirus concerns deepen, currencies correlated to risk like the Rand could be in for fresh losses.

Overall, central bank news and global developments will be the most influential factors for the Pound to South African Rand (GBP/ZAR) exchange rate next week.

Josh Jeffery

Contact Josh Jeffery