The Pound South African Rand (GBP ZAR) exchange rate slipped from its best levels this morning as UK manufacturing slowed slightly last month.
According to data release by IHS Markit the UK’s Manufacturing PMI fell from a three-year high of 57.3 to 56.7 in May as foreign orders only saw moderate growth last month.
Lee Hopley, chief economist at EEF said;
‘Output and orders expansion is being driven by resilient demand coming through UK supply chains and a better looking global economy than UK manufacturers have been used to for some time.’
While activity slowed slightly last month, it is still a strong report for the UK economy and suggests that UK economic growth will be significantly more upbeat in the second quarter after slumping to just 0.2% at the start of the year.
Meanwhile the South African Rand was bolstered following its own domestic manufacturing PMI, which showed that factory activity in South Africa rebounded to 51.5 in May.
This was a notable improvement over April’s figures which showed that the sector contracted, falling below 50 to 44.7.
However the Rand’s advance was slowed somewhat by threat of looming rate decisions, with Fitch and S&P Global Ratings both publishing their latest credit rating for the country later this week and although they are not expected to lower the sovereign rating any lower they are likely to warn of ‘fiscal slippage and a deteriorating political front’.
Looking ahead the GBP ZAR exchange rate may soften on Friday with the release of the UK’s latest Construction PMI, with analysts forecasting that it will have slipped from 53.1 to 52.7 last month.
Meanwhile the South African Rand may rally next week as the latest domestic GDP figures are forecast to show growth in the first quarter after contracting -0.3% at the end of 2016.
However the main focus over the next 7 days is more than likely to be the upcoming UK general election, with recent polls suggesting that the Conservative lead continues to narrow, investors are likely to look closely at the political landscape over the last week of campaign, especially if there is any sign that the election could result in a hung parliament.
Current Interbank Exchange Rates
At the time of writing the GBP ZAR exchange rate was trending around 16.7446 and the ZAR GBP exchange rate was trending around 0.0597.
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