Currency News

Daily Exchange Rate Forecasts & Currency News

Pound Sterling Firms against South African Rand, General Election in Focus

May 5, 2015 - Written by Frank Davies

Pound Sterling Firms against South African Rand, General Election in Focus



The Pound Sterling made gains against the South African Rand as data released at the start of the week continued to weigh on the South African currency. With the UK markets now reopened following their closure for the Bank Holiday weekend movement of the Pound is forecast to be highly volatile as the May 7 general election draws nearer. With the result of the vote far from certain investors are concerned that the UK could end up with either a weak minority government or an unstable coalition.

The South African Rand came under pressure at the start of the week after the latest Kagiso purchasing managers index (PMI) showed that manufacturing activity in Africa’s most developed economy plunged to its weakest level in four years. The report highlighted that rolling blackouts caused by South Africa’s under strain power grid was having a big negative impact upon the national economy.

The Kagiso PMU fell to a reading of 45.4 in April, down from the reading of 47.9 recorded in March. In a PMI, any number below 50 indicates contraction, whilst a number above indicates expansion.

"While the manufacturing sector seems set to contract on a quarterly basis in the first quarter of 2015 (barring a remarkably strong performance in March), the April PMI suggests that a quick recovery is unlikely. In fact, conditions could worsen further in the second quarter. This not only directly hampered output, but also weighed on domestic demand and likely contributed to the 6.7-point drop in the new sales orders index (currently at its lowest level since August 2009,’ said Kagiso Asset Management head of research Abdul Davids.

Also putting pressure on the South African Rand was the release of a report, which showed that the number of new vehicles sold in the country fell by 3.3% on a year-on-year basis in April. The number of new cars sold dropped to 44,503 units. Vehicle sales are a good indication of the health of a economy.

Further support for the Pound Sterling came under strain as the session progressed as the latest UK Construction PMI came in below economist expectations and raised expectations that the UK economy is faltering.

The Construction PMI dipped from March’s strong figure of 57.8 to 54.2 in April. Despite the fall, activity in the sector remains in expansion territory. On Wednesday, the Pound could give up ground if the latest Markit/CIPS Services PMI comes in below expectations.

Advertisement

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.


TAGS: Currency Predictions Daily Currency Updates Poun Forecasts

Comments are currrently disabled