GBP/ZAR Exchange Rate Consolidates Gains on Fed Rate Hike Bets
(Updated: 15:10, 05/01/23) The Pound South African Rand exchange rate continues to trade positively this afternoon, amid Federal Reserve rate hike speculation.
The US published some impress employment figures earlier this afternoon which reported US private sector employment grew at a faster pace than expected last month.
#NEW Private payrolls surge in December
Payroll firm @ADP reports private employers added 235k jobs last month vs 153k expected
Services sector led the gains +213k:
Leisure and hospitality +123,000
Profesional & business services +52k
Education & health services +42k— Greta Wall (@GretaLWall) January 5, 2023
Analysts suggest the bumper employment release is likely to encourage the Federal Reserve to continue to tighten its monetary policy at an accelerated pace.
The prospect of higher US interest rates is stoking global growth concerns this afternoon, dampening the appeal of the emerging market Rand.
Original article continues below:
Pound South African Rand Exchange Rate Bolstered by Underwhelming SA Data
The Pound South African Rand (GBP/ZAR) exchange rate is trending higher so far this morning. Underwhelming South African data appears to be the primary catalyst for this rise.
At the time of writing the GBP/ZAR exchange rate is trading at around ZAR20.4080. Up roughly 0.5% from this morning’s opening rate.
South African Rand (ZAR) Stumbles on Weak PMI Figures
The South African Rand (ZAR) is on the defensive today, following the publication of the latest domestic PMI figures.
Data releases by S&P Global painted a worrying picture of South Africa’s economic outlook. December’s index printed above the 50 threshold which indicates activity in the private sector activity continued to expand.
However, the figures appeared to be massaged by a modest improvement in employment. Other indicators such as new orders, output and inventories all showed declines.
December’s index also highlighted how extensive load shedding and weak demand are taking their toll on South Africa’s economy.
On a more positive front, the index also indicated that inflationary pressures are starting to ease. Purchasing prices were shown to have risen at their slowest pace since early 2021.
Elsewhere, a mixed market mood also appears to be dragging on the risk-sensitive South African Rand this morning.
Pound (GBP) Muted as Services PMI Misses
The Pound ‘s (GBP) gains against the Rand have been tempered this morning in the wake of the UK’s own PMI release.
The finalised release of last month’s services PMI was revised down from 50 to 49.9. While only a very modest revision, the index no long shows the UK’s vital services sector avoiding a contraction in December.
The index highlighted how demand in the UK continues to be undermined by shrinking consumer spending power.
Tim Moore, Economics Director at S&P Global Market Intelligence, commented:
‘UK service providers ended the year with another downturn in new orders as strong inflationary pressures and worries about the economic outlook sapped demand. Overall levels of business activity fell only fractionally, despite an exceptionally challenging business environment and spending cutbacks due to cost of living difficulties.’
The PMI now also shows that the UK services sector contracted every month in the fourth quarter. All but confirming the UK slipped into a recession at the end of 2022.
Pound South African Rand Exchange Rate Forecast: Cautious Mood to Weigh on ZAR?
Both GBP and ZAR data are thin on the ground for the remainder of this week. As a result any movement in the Pound South African Rand (GBP/ZAR) exchange rate may be tied to market risk appetite.
If a cautious mood prevails this could lead the Rand to relinquish even more ground. Chinese Covid concerns and Ukraine uncertainty could both undermine sentiment.
Meanwhile, UK industrial action may be the focus for GBP investors. The potential threat of coordinated strikes later in the year could limit the Pound’s upside potential.
On the other hand, a breakthrough in talks with the rail unions would be Sterling positive.