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Euro to Rand Exchange Rate Rises on High Hopes for Eurozone Inflation Rate Growth

The Euro to Rand exchange rate has fallen by -0.5% on Friday afternoon, in the lull before the South African State of the Nation Address (SONA).

ZAR trader optimism is growing rapidly ahead of the speech, as citizens and economists alike look forward to Cyril Ramaphosa’s imminent remarks.

Job creation is something high on citizens’ wish lists, along with free education and reducing crime.

(First published 16th February, 2018)

German Price Stats Trigger EUR/ZAR Exchange Rate Advance

The Euro to South African Rand (EUR/ZAR) exchange rate has risen slightly on 16th February, following the news that German wholesale prices rose in January.

The month-on-month reading showed growth from -0.3% in December 2017 to 0.9% in January.

The year-on-year price growth figure showed a smaller increase, with an advance from 1.8% in December to 2% in January.

Higher prices in Germany may have a knock-on effect for overall Eurozone inflation, given that the German economy is the largest within the single currency bloc.

If inflation does pick up in the coming months, the Euro could appreciate further because of the positive implications for monetary policy tightening in 2018.

South African Rand to Euro Exchange Rate Tight ahead of Ramaphosa’s SONA Speech

While the Rand to Euro (ZAR/EUR) exchange rate has fallen today, the South African currency has traded more favourably against the Pound and US Dollar.

This mixed movement comes at a historic moment for South Africa, as it welcomes new President Cyril Ramaphosa following the resignation of Jacob Zuma.

Mr Ramaphosa has taken over after Zuma’s almost ten-year presidency, during which the South African economy suffered and credit ratings were repeatedly cut.

Guardian Africa Correspondent Jason Burke has set out President Ramaphosa’s biggest challenges, stating;

‘South Africa remains a country with enormous resources and great wealth but also vast inequality and poverty.

Unemployment remains at an historic high of 27.7% across the general population, and as high as 68% among young people.

Economic growth has been limited in recent years, averaging little more than half the rate of population growth of 1.2%.

Zuma’s departure has sent the rand surging and will spur a rush of much-needed foreign investment’.

Ramaphosa is about to deliver the 2018 State of the Nation Address (SONA), which could set out just how he plans to tackle South Africa’s most pressing problems.

Forecasts for Ramaphosa Plans Keep ZAR/EUR Exchange Rate Close

The Rand has been prevented from falling completely against the Euro today because of optimism about Cyril Ramaphosa’s potential plans for the economy.

Among those speculating on the new President’s first objectives, analysts at ratings agency Standard and Poor’s have said;

‘Mr Ramaphosa and his administration will require time to design and implement measures to improve economic growth and stabilize public finances, given the structural and institutional challenges that South Africa faces.

Economic growth remains low, impeding the path to fiscal consolidation.

We think the government will attempt to introduce offsetting measures in an effort to improve budgetary outcomes, but these may not be sufficient to stabilize public finances in the near term’.

While the S&P outlook is fairly cautious, others are looking on the brighter side and remain optimistic about the possible benefits of Ramaphosa’s regime.

Euro to Rand Exchange Rate Forecast: EUR/ZAR Rate could Fall on Confidence Stats

While the Euro has gained against the Rand at the end of the week, this positive performance may be lost in the near-future.

Eurozone consumer confidence data is out on 20th February and is predicted to show lower levels of economic optimism; the Euro could fall in value on such news.

Sticking with politics in South Africa, if Cyril Ramaphosa’s first statements suggest that he has solid plans for boosting ZA economic growth then the Rand could rally.