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Easing of US-China Trade Tensions Causes Pound Sterling South African Rand (GBP/ZAR) Exchange Rate to Slide

August 30, 2019 - Written by John Cameron

Pound South African Rand (GBP/ZAR) Exchange Rate Slides Ahead of ZA Trade Balance

The Pound Sterling South African Rand (GBP/ZAR) exchange rate slumped by around -0.6% on Friday morning.

The pairing is currently trading at an inter-bank rate of R18.5618.

The risk-sensitive Rand edged up thanks to China’s latest move which eased US-China trade tensions.

On Thursday, China stated it was willing to resolve the trade war with a ‘calm attitude’ and hinted it would not retaliate against further US tariffs for now.

Spokesman for China’s Ministry of Commerce, Gao Feng stated:

‘We firmly reject an escalation of the trade war, and are willing to negotiate and collaborate in order to solve this problem with [a] calm attitude.’

However, later in the morning, ZAR retreated ahead of the South African monthly budget balance data and trade figures.

In a note, traders at ETM Analytics stated:

‘With the Rand still teetering not far off its highest levels in almost a year, weak data could keep the Rand on the defensive.’

Sterling (GBP) Slides as UK GfK Consumer Confidence Slides

GfK consumer confidence slumped to its joint-lowest since 2013 as pessimism about the economy grew.

The survey fell from -11 in July to -14 in August.

Commenting on Friday’s data, Client Strategy Director at GfK, Joe Staton said:

‘Until Brexit leaves the front pages – whenever that will be – consumers can be forgiven for feeling nervous not just about the wider economy but also about their financial situation.’

Added to this, Sterling remained under pressure as data revealed Brexit pessimism caused a slump in business confidence in August.

The Lloyds Bank Business Barometer slumped to 1% in August from 13% in July.

This was the lowest level since December 2011 which weighed on GBP.

The pairing slumped on as the reports added to signs the country’s economy will struggle to rebound from is contraction during the second quarter.

South African Rand (ZAR) Rises despite Disappointing Inflation

Meanwhile, on Thursday the South African Producer Price Index (PPI) came in at a lower-than-forecast 4.9% in July.

This is the first time the index has fallen below 5% since March.

Statistics South Africa revealed month-on-month producer prices slumped by -0.2% following a rise of 0.4% in June.

However, this could do little to stop the Rand from rising against Sterling on Friday.

Pound South African Rand Outlook: Will Disappointing ZA Business Confidence Weigh on ZAR?

Looking ahead to Monday, the Pound (GBP) could slide against the South African Rand (ZAR) following the release of the UK manufacturing PMI.

If August’s PMI remains in contraction territory, Sterling sentiment could be left dampened.

Meanwhile, the South African Rand could slide following the release of the South African Business Confidence Index.

If business confidence slides in August, the Pound South African Rand (GBP/ZAR) exchange rate may rise.

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