Rising US-China Trade Tensions Boost Pound South African Rand (GBP/ZAR) Exchange Rate

GBP/ZAR Exchange Rate Edges Higher, Global Trade Tensions Weigh on South African Rand

The Pound South African Rand (GBP/ZAR) exchange rate edged higher today, leaving the pairing trading around R18.114 as the risk-averse ZAR continues to struggle after trade tensions flare-up between the US and China yesterday.

Beijing’s limiting of the Chinese Yuan has been seen as a form of retaliation against the US following President Donald Trump’s announcement of fresh tariffs on Chinese imports.

The US administration has also accused China of ‘currency manipulation, with US Treasury Secretary Steven Mnuchin now engaging with the International Monetary Fund (IMF) to challenge China’s ‘unfair’ competitive advantage.

As a result, the risk-correlated South African Rand has suffered, with China being one of its largest trading partners.

South African Rand traders are also becoming increasingly jittery over SA’s domestic economy, which is suffering from low confidence levels and high unemployment while the rating agency Moody’s forthcoming rating is also expected to be negative.

Peter Montalto, the Head of Capital Markets Research at Intellidex, said:

‘I think the [South African Rand] will grind weaker, given there is not much government can do to respond to the [economic] crisis.’

GBP/ZAR Exchange Rate Rises despite Boris Johnson’s Unwillingness to Renegotiate Brexit Deal

The Pound (GBP) has benefited from rising global trade tensions today, with rising global trade tensions temporarily eclipsing no-deal Brexit fears.

Meanwhile, Prime Minister Boris Johnson is reported to have no intentions of renegotiating the withdrawal agreement with the European Union.

A spokesperson for Downing Street said:

‘The fact is the [present] withdrawal agreement has been rejected by parliament three times and will not pass in its current form so – if the EU wants a deal – it needs to change its stance. Until then, we will continue to prepare to leave the EU on 31 October.’

Sterling traders are becoming increasingly jittery as a no-deal is now being assumed by both the UK and the EU.

Today saw the publication of the UK BRC Like-For-Like Retail Sales figures for July, which confirmed consensus and rose from -1.6% to 0.1% – its lowest rate of growth in July since 1995.

Esme Harwood, a Director at Barclaycard, said:

‘Spending has remained relatively subdued over the past few months, with an underlying uncertainty about the wider economic and political landscape causing many to hold off making purchases on bigger ticket items.’

GBP/ZAR Outlook: Brexit and Ongoing US-China Trade Tensions to Remain in Spotlight

South African Rand traders will be looking ahead to tomorrow’s release of the SA Business Confidence Index for July.

Any signs of improvement could provide some uplift for the ZAR/GBP exchange rate.

Tomorrow will see the publication of the UK Halifax House Prices figures for July, which are expected to improve from -0.3% to 0.3%.

The GBP/ZAR exchange rate will likely remain volatile this week as both Brexit and ongoing global trade developments will remain in the spotlight.

David Moore

Contact David Moore