The Pound Sterling to South African Rand (GBP/ZAR) exchange rate firmed on Wednesday as UK data beat forecasts and data out of South Africa disappointed.
According to Markit/CIPS, the UK Services Purchasing Managers Index (PMI) showed that the dominant sector expanded at a faster pace than forecast in January by rising to a reading of 57.2. That figure was higher than the year and a half low of 55.8 seen in December and was better than the number expected by economists.
‘The data will allay fears that the economy is slowing sharply, having merely seen growth cool during the winter to a more sustainable pace. Even more encouraging is the upturn in employment. The surveys are currently signalling an impressive new rate of job creation of approximately 70,000 per month,’ said Markit’s chief economist Chris Williamson.
The positive services index caused the UK composite PMI, which combines data from construction, services and manufacturing, rose to a figure of 56.9 in January, up from the reading of 55.5 seen in December.
Following the release of the data, the Pound Sterling to South African Rand Exchange Rate hit a session high of 17.356
The South African Rand was weakened by concerns over the nation’s power supply, and from economic data that showed that the country’s private sector shrank in January.
The HSBC PMI fell to 49.8 as many companies reported in a fall in output and new orders and new export orders were weakened. The figure was worse than December’s PMI figure of 50.2 and was below the 50 level, which divides expansion from contraction.
‘There was a broad-based weakening in South Africa’s economic environment. In recent months, headline PMI readings have pointed towards fading growth momentum, suggesting South Africa’s growth prospects in 2015 remain fragile,’ said HSBC economist David Faulkner.
South African Rand Forecast
The South African Rand could recover lost ground and tick higher against the Pound and other peers later in the week if German factory order and industrial production data comes in negatively on Thursday and Friday.
Weak figures will emphasise the need for the European Central Bank to remain accommodative, something that will aid the Rand and other emerging market assets.
