The Pound South African Rand (GBP/ZAR) exchange rate remains on the defensive this morning, following the pairing’s losses on Thursday following Trump’s attack on Theresa May’s Brexit plans.
Pound (GBP) Plummets as Trump Dents Hopes for US Trade Deal
The Pound South African Rand (GBP/ZAR) exchange rate came under heavy pressure overnight on Thursday, with investors shunning Sterling in wake of comments from US President Donald Trump, slamming the UK’s Brexit white paper.
Speaking to The Sun, Trump appeared to attack Theresa May’s proposals for Brexit, suggesting the government’s plans to retain close ties to the EU ‘will probably kill’ any chance of the UK getting a post Brexit trade deal with the US.
The US President even looks to take a swipe at the Prime Minister herself as he said former Foreign Secretary Boris Johnson would make a ‘great prime minister’ and that he ‘got what it takes’.
This has put May in a very difficult position, providing ammunition to critics of her Brexit blueprint, further undermining her position as the PM who can deliver the Brexit voted for by the public and dragging on Sterling sentiment.
Fiona Cincotta, senior market analyst at City Index, said:
‘US President Trump has put his counterpart Teresa May in a difficult position this morning saying that a soft Brexit would mean no trade deal between the UK and US. This comes a day after May released a white paper on the UK-Europe relationship after Brexit, offering a softer stance ahead of next week’s vote on a Brexit trade bill.
Trump’s comments come at a particularly bad time for May who is facing bigger problems as her government is in a precarious balance after the resignations of David Davis and Boris Johnson earlier this week.’
Is the South African Rand (ZAR) Poised to Fall as Trade Tensions Continue to Build?
Meanwhile the South African Rand’s (ZAR) advance has been clipped somewhat by warnings that the currency’s recent rally is set to run out of steam in face of growing trade tensions.
The Rand has enjoyed somewhat of a renaissance since the start of July, strengthening against the majority of its peers and making particular inroads against the US Dollar (USD) where it has gained 2.2%.
However analysts are beginning to suggest that the Rand’s fortunes may soon be changing, with markets expected to become increasingly hostile toward emerging currencies in the face of growing global trade uncertainty.
Piotr Matys, emerging-markets currency strategist at Rabobank, said:
‘The Rand is under renewed selling pressure amid fading positive market sentiment. The prospect of a full-scale trade war remains the main risk factor for the Rand and its peers.
The vicious cycle (of tit-for-tat tariffs) may still accelerate in the second half of the year, which would have serious negative consequences for emerging markets.’
These fears have analysts predicting a sizable downturn in the South African Rand exchange rate, with economists predicting it could slide as much as 6% by the end of the third quarter.
GBP/ZAR Exchange Rate Forecast: Potential Jump in UK Wage Growth to Drive Sterling Rally?
Looking ahead to next week’s session, the Pound South African Rand (GBP/ZAR) exchange rate could surge higher following the publication of the UK’s latest employment data.
With unemployment expected to have continued to have held at a 42-year low in May the focus is likely to be on the accompanying wage growth figures.
Forecasts that wages will have ticked higher could help to light a fire under Sterling (GBP) on Thursday, with investors hoping a strong reading will help to bolster the chances of the Bank of England (BoE) committing to a rate hike in August.
Meanwhile movement in the South African Rand (ZAR) exchange rate is likely to be driven by the South African Reserve Bank’s (SARB) latest rate decision, with the Rand possibly finding some stability if the bank sticks to expectations to leave its policy untouched in June.
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