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Pound South African Rand (GBP/ZAR) Exchange Rate Sinks as US-China Trade Tensions Ease

GBP/ZAR Exchange Rate Falls as South African Rand Benefits from Increased Risk Appetite

The Pound South African Rand (GBP/ZAR) exchange rate fell by 0.5% to R18.570 today, following easing US-China trade-war tensions after China said on Thursday that it was willing to do face-to-face talks with the US.

As a result, the South African Rand has benefited from returning risk appetite today, as global markets seek out riskier assets on soothing tensions between the two superpowers.

US President Donald Trump has reassured South African markets, saying that the US and China will resume trade talks next week.

Mr Trump commented:

‘There’s a talk scheduled for today at a different level… Let’s see what the end product is; that’s what you have to judge it by.’

Gao Feng, the spokesperson for China’s Commerce Ministry, said:

‘The most important thing at the moment is to create necessary conditions for both sides to continue negotiations.’

Today also saw July’s South African private sector grow above forecasts from 6.91% to 7.19%.

GBP/ZAR Exchange Rate Falls as UK Consumer Confidence Falls in August

The Pound fell against the South African Rand following this morning’s publication of August’s GfK consumer confidence figure, which fell below consensus from -11 to -14.

Joe Staton, Client Strategy Director at GfK, commented:

‘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.’

Meanwhile, the UK’s political developments have remained in focus, with cross-party opposition increasing following Prime Minister Boris Johnson’s request for a suspension of Parliament from mid-September until the Queen’s speech on October 14.

However, Sterling traders have become increasingly jittery as the first attempt to legally block Johnson’s proroguing of Parliament has fallen through.

Labour MP Ian Murray echoed the oppositions overall response, saying:

‘It is disappointing that we have to go to the courts to protect British democracy, but Boris Johnson’s attempt to silence the people’s representatives cannot go unchallenged. As well as this legal battle in the court of session, the campaign against a no-deal Brexit will also take place in the House of Commons.’

GBP/ZAR Outlook: UK Political Developments to Remain in Spotlight

Sterling traders will be looking ahead to Monday’s release of August’s Markit Manufacturing PMI. Any signs of improvement would prove Pound-positive.

South African Rand investors, meanwhile, will be waiting for Monday’s publication of the South African business confidence index for August.

These will also be followed by the South African total new vehicle sales in August. If these improve, we could see the South African Rand hold on to some of today’s gains.

The GBP/ZAR exchange rate will likely remain volatile next week, as political tensions are likely to escalate as opposition parties push forward with legal challenges against the Conservative Government’s prorogation of Parliament.