Near-Record Highs in Eurozone Construction Push EUR/ZAR Exchange Rate Higher
While the Eurozone manufacturing PMI for January has slowed from 60.6 points to 59.6, it remains near a historically high level.
The news has been received positively by IHS Markit Chief Business Economist Chris Williamson, who has said;
‘The Eurozone’s manufacturing boom continued in full swing in January.
Output grew at one of the fastest rates recorded over the survey’s 20-year history, matched by a further near-record surge in new orders’.
Rand to Euro Exchange Rate Tumbles as President Zuma Tipped for SONA Speech
Widespread trader disappointment has led to the South African Rand plunging in value today, against the Euro, the Pound and the US Dollar.
This all-around Rand weakness comes in the wake of rumours that President Jacob Zuma will be delivering the State of the Union Address (SONA) this year.
The annual speech summarises South African developments over 2017 and looks ahead to policy plans for 2018.
Zuma giving the address is problematic, as it suggests that he won’t be stepping down from office anytime soon.
South Africa’s ruling African National Congress (ANC) elected Cyril Ramaphosa as party President last year, but Zuma remains the national leader.
While Zuma could still be removed from office or step down in 2018, his high-profile SONA delivery has represented a step away from this outcome for Rand traders.
Euro to Rand Weekly Forecast: EUR/ZAR Rate could Rise on PMI Growth
Next week’s main Eurozone economic data will cover PMI activity and retail sales data on Monday, followed by the German trade balance on Thursday.
The Euro could advance against the South African Rand on Monday, if the Eurozone services and composite PMI readings show growth as forecast.
The composite PMI covers overall Eurozone economic activity for January and if it is revised up, the Euro may firm.
Also out on Monday, however, are Eurozone retail sales figures for December.
These are tipped to show slowing sales in December, which might limit a Euro to Rand advance triggered by the earlier PMI data.
The later German trade balance figures are predicted to show a reduction in the December surplus, which could limit demand for the Euro.
Rand movement could be influenced by the SONA speech on Thursday next week, although South African mining data will also be out on the day.
Falling mining production figures may keep the ZAR/EUR exchange rate in check, outside of any SONA influences.
If President Zuma explicitly states that he will be handing over the reins as President in 2018, the Rand could rise sharply.
Zuma has been blighted by corruption allegations and questionable economic decisions, so his departure could open the door to an economic revival.