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Pound South African Rand Exchange Rate Eases, US-China Trade Developments Improve on Possible Truce

South African Rand Currency Forecast

GBP/ZAR Exchange Rate Dips as on Risk-On Appetite for South African Rand

The Pound South African Rand (GBP/ZAR) exchange rate eased today, with the pairing currently trading around R18.644 after talks between the US and China boosted confidence in a possible trade deal by November. As a result, this boosted market confidence in the risk-averse South African currency, which is particularly reliant on stability between the world’s two superpowers.

This follows US President Donald Trump’s announcement on Friday that the US and China had reached ‘phase one’ of a trade deal, while threats of a tariff hike were suspended, thus boosting market appetite for emerging market currencies.

David Dollar, a China Economist Expert at Brookings Institution, was sceptical, however:

‘By leaving all the other tariffs in place, [the Trump administration] can say they’re being tough on China, and they’re not going to give in. It seems like there’s not much prospect for further negotiation and opening up in China.’

With no South African economic data due out today, the South African Rand is, however, likely to remain buoyed on signs of improving relations between China – South Africa’s largest trading partner – and the US.

GBP/ZAR Exchange Rate Eases, UK-EU Brexit Developments Slow Down on Irish Backstop Complications

The Pound (GBP) has remained subdued against many of its competitors today after UK-EU Brexit discussions came to a standstill over the weekend, with the Irish backstop remaining a critical obstacle towards a possible Brexit deal.

Today also saw the Queen reiterate the Conservative Government’s priority for the UK to leave the EU by October 31, which has further exacerbated fears of a no-deal Brexit with the Irish backstop presently unresolved.

This follows reports that Prime Minister Boris Johnson has warned colleagues that there still remains a “significant amount of work” for a deal to be passed before the end of the month.

Meanwhile, Jean-Claude Juncker heightened fears that Mr Johnson could also fail to request an extension to Article 50, saying:

‘It’s up to the Brits to decide if they will ask for an extension. But if Boris Johnson were to ask for extra time – which probably he won’t – I would consider it unhistoric to refuse such a request.’

GBP/ZAR Outlook: Could Sterling Soar on a UK-EU Brexit Breakthrough This Week?

Sterling traders will be looking ahead to tomorrow’s publication of August’s UK ILO unemployment rate, which is expected to hold at 3.8%.

Tomorrow will also see the release of August’s UK average earnings figure, which is forecast to improve by 3.7%. As a result, we could see market optimism return in Sterling as the UK economy remains relatively resilient despite political uncertainties surrounding Brexit.

South African Rand investors, meanwhile, will be looking ahead to Wednesday’s release of August’s South African retail sales figure, which is expected to rise by 1.5%.

However, US-China trade developments will drive market confidence in the risk-sensitive Rand, with any signs of a truce – or trade deal – emerging between the two superpowers boosting risk-appetite for the South African currency.

Brexit developments will remain in the driving seat for the GBP/ZAR exchange rate, with any signs of a UK-EU consensus on the Irish backstop seeing the Pound soar on restored hopes of a Brexit deal by the end this month.