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‘Slow Puncture’ Brexit Uncertainty Leaves Pound Sterling South African Rand (GBP/ZAR) Exchange Rate Flat

Bank of England

Pound South African Rand (GBP/ZAR) Exchange Rate Muted as BoE may Cut Rates if UK Avoids No-Deal

The Pound Sterling South African Rand (GBP/ZAR) exchange rate was left muted and the pairing is currently trading around R18.5360.

On Friday, Bank of England (BoE) policymaker Michael Saunders noted the bank may need to cut interest rates if Brexit uncertainty persists.

Saunders notes that if a no-deal is avoided this would cause further levels of Brexit uncertainty which would act as a ‘slow puncture’ to the UK economy.

Speaking to local businesses in Barnsley, Saunders stated:

‘If the UK avoids a no-deal Brexit, monetary policy also could go either way and I think it is quite plausible that the next move in Bank Rate would be down rather than up.

‘In general, I would prefer to be nimble, adjusting policy if it appears necessary to keep the economy on track, and accepting that it may be necessary to change course if the outlook changes significantly.’

Sterling (GBP) Flat as Brexit Leaves British Consumers ‘Treading Water’

At the end of the week, data revealed that UK consumer confidence held up better than expected despite the fresh wave of Brexit turmoil.

GfK’s consumer confidence index edged up from -14 to -12 following Prime Minister Boris Johnson’s plans to suspend parliament ahead of the 31 October Brexit deadline.

Commenting on the data, client strategy director at GfK, Joe Staton said:

‘British consumers appear to be treading water during this wait-and-see run-up to October 31. You can almost sense people are keeping their fingers crossed.’

However, the Federation of Small Businesses revealed that there was a worryingly low number of small firms that were prepared for Brexit.

Out of those that are likely to be harmed by a no-deal, only 20% have taken any action, which likely dampened Sterling sentiment.

South African Rand (ZAR) Muted as China Calls for US to Reduce ‘Pessimistic Language’

The South African Rand was left flat against the Pound on Friday as investors weighed fresh political turmoil in the US.

The Rand was left muted despite a top Chinese diplomat revealing China was willing to buy more US products ahead of next month’s in-person talks.

Added to this, US President Donald Trump announced the US-China trade deal could happen sooner than expected.

While this likely sparked an upswing in risk appetite, the Rand struggled to rise against the Pound.

China’s state councilor and foreign minister, Wang Yi said trade talks would be successful if both sides ‘take more enthusiastic measures’ to show goodwill and reduce ‘pessimistic language’.

On the sidelines of the UN General Assembly, Wang stated:

‘And so, [on] the Chinese side, we are willing to buy more products that are needed by the Chinese market.

‘We hope both sides can take more enthusiastic measures, reduce pessimistic language and actions. If everyone does this, talks will not only resume, but will proceed and yield results.’

Pound South African Rand Outlook: Will Weak Q2 Growth Weigh on GBP?

Looking ahead to next week, the Pound (GBP) could slump against the South African Rand (ZAR) following the release of final Q2 UK growth figures.

If growth weakens to a lower than expected figure in the three months leading to June, Sterling sentiment could be left dampened.

However, the pairing could be left muted on Monday afternoon following the release of South Africa’s trade balance.

If August’s trade balance disappoints it could leave the Pound South African Rand (GBP/ZAR) exchange rate flat.