September 4, 2017 - Written by David Woodsmith
STORY LINK Pound to Rand Exchange Rate Forecast, Key Data to Watch Over Next Five Days
The pound to rand exchange rate has been in steady decline from early August highs where the pair touched 1 GBP = 17.51.
GBP/ZAR, on Tuesday 5th September, is quoted at 16.76288.
Decent UK data was not able to help the British Pound to hold its ground. The pair slipped due to strong South African trade and manufacturing results despite South African political uncertainties.
After beginning last week at around 16.80, the GBP/ZAR ended the week below its opening levels, closer to lows of 16.71. This was the pair’s lowest levels since June.
The Pound Drops against South African Rand Despite Solid UK Data
Recent UK ecostats have largely beaten expectations, but as the South African Rand became more appealing following weeks of mixed movement, GBP/ZAR has fallen.
Sterling did limit GBP/ZAR losses though, thanks to the strong data.
Markit’s August manufacturing PMI for Britain beat forecasts of 55 and came in at 56.9. The previous figure was revised higher, from 55.1 to 55.3.
Analysts were generally optimistic about the report but some uncertainties remained. According to Rob Dobson, Director at IHS Markit which compiled the report;
‘The key question is whether this positive start to the second half of the year can be sustained. This is looking increasingly likely during the near-term, given the breadth of the expansion. Business conditions improved across the three main subsectors – consumer, intermediate and investment goods – and at smaller and large-scale producers alike. Business confidence also rose to one of its highest levels in over a year’
On top of the strong manufacturing data, the latest UK mortgage approval and Bank of England (BoE)
consumer credit results beat expectations.
However, overall the data was not able to notably improve the Pound outlook. Sterling demand was pressured by the latest Brexit concerns, as mutterings suggest that UK-EU negotiations are not going as smoothly as hoped and have not made much progress.
The South African Rand, on the other hand, has seen stronger demand in recent sessions.
Markets have now cooled from disappointment that SA President Jacob Zuma had once again survived a no-confidence vote in early-August.
Demand for the Rand was boosted further by SA data, which has beaten expectations.
South Africa’s July trade surplus came in at ZAR8.99b, rather than falling to ZAR5.8b as forecast. The previous figure was revised down slightly though, from 10.67b to 10.56b. This notably marked South Africa’s sixth consecutive trade surplus.
ABSA’s August South African manufacturing PMI also improved, from 42.9 to 44.
Overall, while Britain’s recent data was strong, Brexit uncertainties and a more appealing South African Rand left GBP/ZAR weaker at the end of last week.
Pound Sterling (GBP) Forecast: UK Services PMI in Focus
The Pound to South African Rand exchange rate is likely to be influenced by Pound movement next week, as Markit’s influential UK services PMI for August will be published.
The services PMI will come in on Tuesday, alongside Markit’s UK composite PMI. If services fall short of expectations, it will worsen concerns that Britain’s economy is not staying resilient amid Brexit concerns and the recent pay squeeze.
However, strong services data would be Pound positive as services make up Britain’s biggest economic sector. This would indicate that the strength of Britain’s economy is persisting despite Brexit uncertainty, and the Pound would become more appealing.
Later in the week, Pound trade could also be influenced by July’s trade deficit update, as well as manufacturing production, industrial production and construction output reports from July.
South African Rand (ZAR) Forecast: South African Growth Data Ahead
Rand trade could be a little busier next week, as Tuesday will see the publication of South Africa’s Q2 Gross Domestic Product (GDP) results.
If South African growth beat expectations in Q2, it could offset recent concerns about SA political instability damaging economic growth. This would make the Rand more appealing and could put pressure on GBP/ZAR.
Later in the week, South African mining and manufacturing production data from July will be published.
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