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Pound South African Rand Exchange Rate News: GBP/ZAR Close to Two-Month High as Markets Rocked by Global Recession Fears

August 15, 2019 - Written by John Cameron

South African Rand (ZAR) Weakened by Recession Fears

The South African Rand (ZAR) remained on the back foot on Thursday, as markets remains wary of spooked by the prospect of a global recession.

These fears come after US bond yield inverted for the first time in over a decade this week, an event which is traditional thought to herald a prolonged slowdown in the US economy and subsequently global growth.

Commenting on yesterday’s inversion Neil Wilson chief market analyst at said:

‘It’s the first time it’s happened since 2007. Meanwhile the 30-year has slumped to a record low. The market is saying the risks are tilted very much to the downside. We are in a new phase of the cycle for markets now.

‘To recap well-worn turf, this inversion been a reliable indicator of recession many times in the past, calling seven out of the last nine.

‘There is undoubtedly a chance of this, although we must caution that so far the US data has been pretty sturdy in the face of global headwinds and the trade policies of the White House. This yield curve inversion is a sell signal for risk assets.’

On top of this trade in the Rand has also been rocked by the prospect of renewed trade tensions between the US and China.

Tensions were re-ignited on Thursday as China’s finance ministry accused the US of violating a trade consensus agreed between Donald Trump and Xi Jinping as the Whitehouse threated to slap fresh tariffs on China.

The finance ministry also pledged to retaliate with counter-measures if these tariffs are imposed.

The renewed tensions between the two powers has cast doubts over talks scheduled to be held in September and has given investors further reason to shun risk-sensitive currencies such as the Rand.

Pound (GBP) Exchange Rates Buoyed by Stronger-than-Expected Retail Sales

Meanwhile, the Pound (GBP) found support on Thursday thanks to the publication of the UK’s latest retail sales figures.

According to data published by the Office for National Statistics (ONS), UK sales growth rose 0.2% in July, down from 0.9% in June but outpacing expectations for a modest contraction.

The ONS attributed the surprise increase in sales to surging online sales growth, which jumped 6.9% last month thanks to promotions such as Amazon’s Prime Day.

July also proved to be a positive month for traditional brick and mortar outlets as well, as department stores recorded their first sales growth in six months.

GBP investors cheered the sales data, with analysts speculating that the positive start to the third quarter is likely to have decreased the risks of the UK slipping into a recession this year.

GBP/ZAR Exchange Rate Forecast: Brexit to Return to the Fore

Looking ahead to the end of this week’s session, the Pound South to African Rand (GBP/ZAR) exchange rate could struggle to maintain its momentum as a lull in UK data puts the focus back on Brexit.

In spite of recent efforts by the UK labour party to garner support from opposition parties for a no-confidence vote in Boris Johnson the UK currently still remains on track for a no-deal Brexit, the prospect of which is likely to limit the appeal of Sterling.

Meanwhile, domestic politics are also likely to be the key catalyst for the Rand going forward as a result of continuing legal challenges against President Cyril Ramaphosa.

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