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Pound-Rand Exchange Rate Rises as UK Escapes Falling into Recession

November 11, 2019 - Written by John Cameron

The Pound Sterling to Rand exchange rate rose on Monday as risk appetite declined, leaving the pairing trading at around R19.0694.

This morning, the Office for National Statistics (ONS) revealed the UK avoided falling into recession during the third quarter as annual growth increased by 1%.

While this was the weakest rate of annual growth seen since 2010 when the UK was pulling itself out of recession, this did little to stop GBP rising against the Rand.

Quarter-on-quarter, growth increased by 0.3% while the economy contracted by -0.1% in September.

Many believe that the uncertainty and confusion surrounding the UK’s divorce with the European Union is damaging growth.

Commenting on this, PwC’s chief economist, John Hawksworth noted:

‘Household spending remains the main motor of growth, with a 0.4% rise in the third quarter bolstered by stronger earnings growth.

‘By contrast, business investment was flat, reflecting the continued drag from Brexit-related uncertainty, which looks set to continue into the fourth quarter.’

South African Rand (ZAR) Slumps as US-China Uncertainty Drags on Risk Appetite

Uncertainty over the signing of the ‘Phase One’ trade deal between the United States and China weighed on the risk-sensitive Rand on Monday.

Last week, officials from both Washington and Beijing announced there would be a rollback of trade tariffs as part of the deal.

However, as the deal has yet to be finalized, this weighed on global markets and further comments from US President Trump sent risk appetite lower.

The President stated that the willingness from both sides to lift trade tariffs that had previously sparked an upswing in risk sentiment was incorrect.

Meanwhile, despite further comments about how talks were progressing ‘very nicely’ from Trump at the weekend, the Rand was left under pressure against Sterling.

Added to this, further data revealed trade tensions caused Chinese producer prices to slump by the most in over three years.

Commenting on this, Samuel Siew, analyst at Phillip Futures noted:

‘China delivered a massive deflationary shock in its factories, providing a somber tone towards the fragile state of the global economy.’

Pound South African Rand Outlook: Will US-China Tensions Weigh on ZAR?

Looking ahead to tomorrow, the Pound (GBP) is likely to slump against the South African Rand (ZAR) following the release of September’s employment data.

If UK unemployment rises higher than expected, and wage growth does not rise as high as expected, Sterling is likely to slide.

Meanwhile, further developments in US-China trade tensions could leave the risk-sensitive Rand under pressure.

If reports reveal relations between Washington and Beijing are strained, and risk appetite amongst investors has declined, the Pound South African Rand (GBP/ZAR) exchange rate is likely to be left flat.

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