The Euro has dropped by -0.5% against the South African Rand (EUR/ZAR) today, following signs that German Chancellor Angela Merkel could step down.
Signs of Merkel Departure in 2018 Drag EUR/ZAR Exchange Rate Rate Down
A recent YouGov survey has been damning of the German leadership, with the Euro seeing a corresponding drop against the South African Rand.
The poll asked if citizens wanted current Chancellor Angela Merkel to step down before the next national election, which will take place in 2021.
47% responded in the affirmative, with only 36% backing the beleaguered Chancellor.
It is generally expected that Merkel will succeed in forming a third grand coalition with the SPD party in 2018, following the inconclusive September 2017 election.
These survey results suggest that Merkel may have a hard time remaining in charge next year, which in turn makes the Euro vulnerable to a crash.
Merkel has long been considered a stable institution within the Eurozone, so her departure may lead to a panic among Euro traders and a sharp EUR/ZAR drop.
South African Rand to Euro Exchange Rate Rises on Ramaphosa Election
The Rand to Euro (ZAR/EUR) exchange rate has risen today, with the South African currency seeing additional gains against the US Dollar and Pound.
These advances are down to high optimism about the new President of the African National Congress (ANC) party, Cyril Ramaphosa.
Mr Ramaphosa was elected at a congress meeting during the previous week; his main rival was an ex-wife of national President Jacob Zuma, Nkosazana Dlamini-Zuma.
Ramaphosa problematically only won by a slim majority, so backers of Dlamini-Zuma might need to be brought around before any policy progress can be made.
Reflecting on the impacts of Ramaphosa’s appointment, economists at Fitch have said;
‘The rise in the Rand in anticipation of Ramaphosa’s victory reflects his public commitment to tackle corruption and revive the economy.
If businesses and consumers view the outcome favourably, this could give a near-term boost to growth. However, political uncertainty and policy challenges remain significant.
The division of the party chairmanship and the national presidency could increase inefficiencies in policy making if there is a period of “cohabitation”’.
For now at least, the Rand’s strength suggests that traders are optimistic about the possibility of significant policy change in 2018.
In an event that could send the Rand soaring, Ramaphosa could even replace Jacob Zuma as national President in 2018; this would end almost a decade of controversial leadership.
Euro to Rand Currency Forecast: Will German Inflation Stats Damage EUR/ZAR Rate?
As 2017 comes to a close, the Euro to Rand exchange rate could drop before the New Year weekend.
Friday afternoon’s main Eurozone data will be German inflation rate readings for December.
Initial estimates are for a slip in annual inflation, from 1.8% to 1.5%. For the monthly reading, economists predict a slight rise from 0.3% to 0.5%.
The annual reading is typically considered the more important of the two, so a decline might trigger a Euro to Rand exchange rate drop.
The last notable South African news of the year will come on Thursday, when the trade balance for November is announced.
This is tipped to show a surplus reduction from 4.56bn to 1.3bn, which could panic ZAR traders.
A falling surplus indicates a tighter export-import ratio, which is bad news for South Africa’s mining companies and exporters.