Pound South African Rand (GBP ZAR) Exchange Rate Fails to Capitalise on UK Services PMI
The Pound Sterling to South African Rand (GBP ZAR) exchange rate stumbled on Thursday, failing to capitalise on an upbeat December UK services PMI while Cyril Ramaphosa’s election as head of the African National Congress (ANC) continuing to keep the Rand afloat.
According to data from Markit, the UK’s services sector purchasing managers index (PMI) jumped to 54.2 in December, beating the previous period’s 53.8 and the forecast of 54.1.
This score marked the second-highest reading since April, with rising consumer spending ultimately boosting business activity during this period.
It should also be noted, however, that Brexit-related uncertainty seems to continue to curb client spending, with new order growth slowing as a result of hesitation towards business investment.
This was reflected in the sentiment of various analysts, with Markit’s Chris Williamson stating:
‘Trends in hiring and business investment in fixed assets such as offices are showing signs of deteriorating, as is expenditure on IT, computing and other business services as worries about Brexit result in delayed spending decisions’.
Rand (ZAR) Exchange Rate Liable to Benefit from Ramaphosa Presidential Bid
December saw a surge in demand for the Rand (ZAR) on news that Cyril Ramaphosa had won the African National Congress (ANC) leadership, news that effectively positions Ramaphosa to become South Africa’s next president in 2019.
This is pertinent in that Ramaphosa is popular amongst investors due to his history in business and his claims that he will crack down on corruption in South Africa.
Whilst some economists worry that it is still too early for Jacob Zuma to be ousted as President, others point to his history of corruption scandals, asserting that Ramaphosa’s time in office could be sooner than anticipated.
There are, however, concerns that Ramaphosa’s leadership of the ANC could begin to clash with Zuma’s control over the government; effectively resulting in conflict between the two power bases.
Nonetheless, the long-term outlook for ZAR continues to be bolstered by Ramaphosa’s new position at the ANC, limiting the GBP ZAR exchange rate.
SA Standard Bank PMI Disappoints, GBP ZAR Exchange Rate Remains Weak Regardless
On the data front, today’s Standard Bank South Africa PMI disappointed markets, falling to 48.4 in December from 48.8 in the previous period. This marked the strongest contraction since April 2016, with output declining at the fastest pace in some 21 months and new orders similarly decreasing.
This news did not affect the GBP ZAR exchange rate, however, with market demand for the Rand still proving upbeat on the relative weakness of the US Dollar and optimism on Ramaphosa’s business credentials.
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