Pound South African Rand (GBP/ZAR) Exchange Rate Eases as ZAR Benefits from Risk-On Trade

September 10, 2019 - Written by John Cameron

STORY LINK Pound South African Rand (GBP/ZAR) Exchange Rate Eases as ZAR Benefits from Risk-On Trade

GBP/ZAR Exchange Rate Down as US-China Trade Deal Hopes Increase

The Pound South African Rand (GBP/ZAR) exchange rate fell by -0.2% today, with the pairing currently trading around R18.192 following July’s SA manufacturing production index which eased from -3.6% to -1.1%.

However, buying sentiment in the South African Rand (ZAR) has continued to increase in hopes of stimulus support for the world’s major economies, such as in Europe and the United States.

Bianca Botes, a Treasury Partner at Peregrine Treasury Solutions, commented:

‘[Political factors] remain overshadowed by the global environment favouring risk-on trade for the time being, offering underlying support for the local unit.’

With China being one of South Africa’s largest trading partners, the Rand has also benefited from renewing hopes of trade developments between the US and China.

Peter Navarro, a White House Advisor, has urged caution, however:

‘If we’re going to get a great result, we really have to let the process take its course. In the meantime, we need to be patient with the China negotiations.’

GBP/ZAR Exchange Rate Eases as Economics Fear UK Labour Cool-Off

The Pound (GBP) failed to gain on the South African Rand today despite July’s ILO unemployment rate easing from 3.9% to 3.8% – a 45-year low.

Today also saw July’s UK average earnings rise from 3.8% to 4% on the year.

Samuel Tombs, an Economist at Panteon Macroeconomics, was downbeat in his assessment of the UK labour market:

‘Most surveys of employment intentions also have deteriorated over the summer and now point to negligible growth in employee numbers. Britain’s so-called “jobs miracle” is starting to lose its shine.’

Brexit uncertainty continues to haunt UK markets, however, with Prime Minister Boris Johnson and the Conservative Party continuing to honour the October 31 deadline, despite last night’s passing of the anti-no-deal Hilary Benn bill into law.

As a result, Sterling traders are becoming increasingly jittery on fears of a no-deal still going through in October, despite the new legislation.

GBP/ZAR Outlook: Brexit Developments to Remain in Focus

South African Rand investors will be looking ahead to tomorrow’s publication of August’s South African business confidence index. Any signs of improvement could further bolster the ZAR/GBP exchange rate.

With no UK economic data due out tomorrow, Brexit will likely remain the main driving force behind the Pound.

The GBP/ZAR exchange rate could begin to edge higher, however, if Boris Johnson seeks to secure a deal with the European Union. Any further indications that the Conservative could compromise, and secure an agreeable alternative to the Irish backstop, would prove Pound-positive.

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TAGS: Pound Rand Forecasts Pound Sterling Forecasts South African Rand Forecasts