Pound South African Rand Exchange Rate Buoyed by UK PMI Surprise
The Pound South African Rand (GBP/ZAR) exchange rate is trending higher this morning. As GBP investors welcome the publication of the UK’s latest PMI figures.
At the time of writing the Pound South African Rand exchange rate is trading at around ZAR23.3866. Up roughly 0.4% this morning’s opening rate.
Pound (GBP) Supported by Upwardly Revised UK Services PMI
The Pound (GBP) is firming this morning, after a welcome revision to UK service sector growth in September.
According to data published by S&P Global, last month’s finalised services PMI was revised up from 47.2 to 49.3.
The #UK Services #PMI indicated a further downturn in service sector activity in Sept (49.3), which was the greatest since the start of the year despite pulling higher from ‘flash’ estimates. Read more: https://t.co/ytJALvn379@SPGlobal @cipsnews pic.twitter.com/geptg1pNt4
— S&P Global PMI™ (@SPGlobalPMI) October 4, 2023
The narrower-than-expected decline in the UK’s vital services sector was well received by GBP investors, although the fact the sector remained in contraction capped Sterling’s upside potential.
The PMI also highlighted the headwinds facing the UK economy in the coming months, which is also likely to have tempered the Pound’s gains this morning.
Tim Moore, Economics Director at S&P Global Market Intelligence, comments:
‘After a modest recovery over the past six months, service sector businesses are now clearly feeling the impact of rising interest rates on client demand. Worries about the broader business climate also dampened spending in August, with firms suggesting that faltering UK economic growth and sticky inflation were weighing on the outlook.’
South African Rand (ZAR) Undermined by Bearish Market Mood
The South African Rand (ZAR) opens today’s session on the defensive as a downbeat market mood limits demand for the safe-haven currency.
Markets seem particularly rattled this morning in the face of a sharp bond selloff. US Treasury yields are at a 16-year high as bond prices plunge.
This collapse in bonds appears linked to concerns that high interest rates are here to stay amid signs that inflation may be stickier than previously hoped.
This is turn has underpinned demand for the US Dollar (USD) and left emerging market currencies such as the Rand facing notable headwinds.
Applying further pressure to ZAR exchange rates was the publication of South Africa’s own PMI release. As it showed the country’s private sector slipped back into contraction territory last month.
Pound South African Rand Exchange Rate Forecast: Underwhelming US Labour Figures to Buoy ZAR?
Looking ahead to the second half of the week, in the absence of any notable GBP or ZAR data its likely movement in the Pound South African Rand (GBP/ZAR) exchange rate will be dictated by external factors.
In the case of the Rand, this could lead to further losses if the US Dollar maintains its bullish trajectory.
However, there’s a chance ZAR exchange rates could be offered some respite with the release of the latest US jobs data.
If the US labour market shows further signs of slowing it may weaken Federal Reserve rate hike bets. This in turn is likely to undermine the US Dollar, potentially relieving some of the pressure on the Rand.
In the meantime, Rishi Sunak’s speech at the Conservative party conference could attract some attention from GBP investors later today. Markets will be eager to dissect his policy priorities and their potential impact on the UK economy.