The Pound Sterling to South African Rand (GBP/ZAR) exchange rate approached the close of Tuesday’s European session with a market movement of -0.59%.
The Bank of England (BoE) events expected to take place this week (such as the latest interest rate decision) could offer the Pound the opportunity to reclaim some losses if any hawkish remarks are made. However, after a string of unfavourable UK data the chances of BoE hawkishness is unlikely.
Earlier… The Pound Sterling to South African Rand (GBP/ZAR) exchange rate has remained relatively static after UK Services expanded at their weakest pace for 19 months in December, offering further support to speculation that the UK economic recovery is slowing.
Pound Sterling Exchange Rate (GBP) Tumbles as Services PMI Slips
Markit’s Services Purchasing Managers Index (PMI) recorded only 55.8 in December from November’s 58.6, the slowest pace of growth since May 2013.
The Markit report read: ‘The UK services economy experienced a loss of growth momentum at the end of 2014, with both activity and new business rising at their weakest rates in over a year-and-a-half.’
The Pound Sterling exchange rate suffered losses against other currency majors on the news.
However, Markit emphasised that UK growth was still above trend.
The report continued: ‘However, despite the slowdown, growth rates remain well above historical averages, amid ongoing reports of a positive economic climate. And with companies remaining optimistic about future activity, payroll numbers continued to rise at a marked pace.’
However, weaker UK ecostats are causing fears that the Bank of England (BoE) will be unable to raise interest rates in the near future.
2014 saw two hawkish Monetary Policy Committee (MPC) members vote in favour of immediate interest rate increases on several occasions; but with data easing quite significantly, the central bank may postpone hiking rates for even longer.
Markit’s chief economist stated: ‘The loss of momentum toward the year end will no doubt fuel worries that the upturn is too fragile to withstand higher interest rates. The survey data provide policymakers with a mixed bag of news on the health of the economy.’
Meanwhile, the South African Rand (ZAR) has stabilised after recording losses earlier in the week.
The emerging-market currency took a hit as investors speculated that the European Central Bank (ECB) would begin printing money in the near future.
In addition to Eurozone quantitative easing (QE) speculation, the prospect of weakening global growth saw investor sentiment in emerging-market currencies wane.
The Rand has recorded two-and-a-half week lows against the US Dollar (ZAR/USD) as ‘Greenback’ strength dominates the market. Industry experts fear that the delicate South African economy could come under further pressure when the Dollar Bull Run eases.
Trader Warrick Butler stated: ‘The investment money is going to flow into those risky assets that are less susceptible to external shocks and have their ducks in somewhat of a row. This is where my fear factor starts kicking in because South Africa is not in that position.’
Pound Sterling to South African Rand (GBP/ZAR) Exchange Rate Forecast
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate could feel the effect of SA Total New Vehicle Sales on Wednesday and Foreign Exchange Reserves on Friday. Any positive figures could lend support to the ZAR/GBP exchange rate.
In addition, the Bank of England will announce its most recent interest rate decision this week as well as releasing information pertaining to its actions during the global financial crisis. Any hawkish remarks from the BoE could fuel Pound Sterling gains.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is presently trending in the region of 17.8840 with a +0.17% market movement.