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Pound South African Rand Exchange Rate Rises, US-China Trade Uncertainty Weigh on South African Rand

October 7, 2019 - Written by John Cameron

GBP/ZAR Exchange Rate Edges Higher, Global Political Uncertainties Drags Down Rand

The Pound South African Rand (GBP/ZAR) exchange rate rose by 0.7% today, with the pairing currently trading around R18.667 after China removed key trade issues from the negotiation table with the US ahead of this week’s negotiations in Washington. As a result, the risk-sensitive ZAR plunged against Sterling.

This follows news that China’s Vice Premier Liu He was reported to have said that he would refuse to reform Chinese industrial policies or government subsidies – two of US President Donald Trump’s main issues with the US-China trade dispute.

Analysts at Nedbank commented:

‘[South African markets] remain firmly at the mercy of headlines. From the U.S., we have talks of an impeachment; in the UK, Brexit and its effects remain; and global attention is now on the scheduled resumption of trade talks between China and the U.S.’

With the South African Rand particularly sensitive to indications of a global economic slowdown, any further indications of flaring tensions between the two worlds’ largest economies could continue to drag on the ZAR/GBP exchange rate.

GBP/ZAR Exchange Rate Improves Despite New Brexit Deal Deadline

The Pound (GBP) rose against a weaker South African Rand (ZAR) today despite French President Emmanuel Macron’s request that Prime Minister Boris Johnson presents a revised version of his new Brexit proposal as early as this week.

Sterling has remained subdued against many of its competitors today, with British markets becoming increasingly jittery over the prospect of UK-EU relations breaking down and potentially forcing a disorderly exit on October 31.

Boris Johnson, however, was critical of the EU’s approach to negotiations, saying:

‘We’ve gone a long way. We’re talking about keeping Northern Ireland in alignment with Ireland by consent, whether over agri-foods or over industrial products and standards. Now that’s a big concession by the UK. The issue is what is the EU’s objections to that? What’s their suggestions? Where are they coming from? We haven’t really heard the detail from them about what they think the problems are.’

In UK economic news, today saw the release of September’s Halifax house price figure fall to its worst pace of growth in 6-years at -0.4%.

Russell Galey, Managing Director at Halifax, commented:

‘Looking ahead, we expect activity levels and price growth to remain subdued while the current period of economic uncertainty persists.’

GBP/ZAR Outlook: Could Sterling Rise on UK-EU Brexit Compromise?

Sterling traders will be looking ahead to tomorrow’s release of September’s UK BRC Like-for-Like retail sales, which are expected to come in flat at 0%.

Tomorrow will also see Mark Carney, the Governor of the Bank of England (BoE), deliver a speech. However, any dovish comments about the flagging British economy could weigh on market confidence in Sterling.

Meanwhile, South African Rand traders will be looking at US-China trade developments, with talks set to go ahead in Washington later on this week.

Brexit developments, however, will continue to drive the GBP/ZAR exchange rate. Any signs of a compromise between the UK and the EU over a possible Brexit deal this week, however, could see Sterling benefit from easing fears of a no-deal Brexit this month.

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