Euro South African Rand (EUR/ZAR) Exchange Rate Rises as US-China Trade Tensions Heat Up
The Euro South African Rand (GBP/ZAR) exchange rate rallied by around 0.6% and the pairing is currently trading at around R16.4682.
The pairing jumped as risk-appetite amongst investors waned following the latest exchanges between the United States and China.
In a speech, US President Donald Trump criticised China’s trade practices and said he would not accept a ‘bad deal’ in the ongoing negotiations between the powers.
This left the risk-sensitive South African Rand under pressure as these comments come just weeks before scheduled in-person trade talks.
Commenting on Trump’s speech, chief strategist at Sumitomo Mitsui Bank, Daisuke Uno said:
‘Trump’s speech was full of sensitive words for China – trade practices, currencies, freedom of religion and so on. It is not hard to imagine it will irritate China.
‘In the past China has reacted to US pressure on trade by bringing down the Yuan. It appears we are having that settings again.’
Added to this, China’s top diplomat hit back at Trump’s remarks stating China had no intention to ‘play ‘Game of Thrones’ on the world stage’.
Euro (EUR) Rises as German Business Morale Edged Up
On Tuesday data revealed that German business morale rose for the first time in six-months.
Despite this, as Brexit and the US-China trade war creates further uncertainty the bloc’s largest economy is still sliding towards a recession.
Breaking a run of five consecutive falls, Ifo’s business climate index edged up to 94.6 to 94.3 in August.
Commenting on the data, Ifo President, Clemens Fuest said:
‘The downturn is taking a breather.’
But, he added:
‘In manufacturing, the business climate has only one direction: downward.’
Added to this, Ifo economist Klaus Wohlrabe suggested the economy is likely to shrink once again in the third quarter, leaving Germany in a recession.
Speaking to Reuters, Wohlrabe noted:
‘This is not the start of a change of trend. The slowdown is taking a break.’
Despite this, the single currency edged up against the risk-sensitive South African Rand.
Euro South African Rand Outlook: Will Disappointing German Consumer Confidence Weigh on EUR?
Looking ahead to Thursday, the Euro (EUR) is likely to edge down against the South African Rand (ZAR) following the release of German consumer confidence data.
If GfK’s consumer confidence slumps in October, the single currency could be left under pressure.
Meanwhile, the release of South Africa’s Producer Price Index (PPI) could provide a slight upswing of support for the Rand.
If August’s inflation rate edges up higher than expected, the Rand could rise.
However, it is likely the Euro South African Rand (EUR/ZAR) exchange rate will be left muted if risk-appetite continues to decrease.