The Euro has continued to worsen against the South African Rand today, falling to a lower exchange rate of 15.9501.
As tensions in Catalonia remain high, Catalan President Carles Puigdemont has accused Spanish PM Mariano Rajoy of ignoring his invitation to talks.
Neither side seems likely to back down in the near-term, so it is possible that Rajoy will do the unprecedented and impose Article 155 next week.
This would essentially transfer power from the Catalan government to the Spanish authorities and could provoke violent unrest across the region.
(First published October 12th, 2017)
Continued uncertainty about Catalonian efforts for independence have led to Euro losses today, with even strong production stats not enabling a rise against the Rand.
- EUR ZAR rate down at 15.9795 – ZAR EUR trades up at 0.0625
- Euro remains soft despite higher production stats – Catalonian situation remains tense
- Rand rises on world bank stats – IMF downgrades ZA outlook
- Euro volatility possible on ECB speeches – Will Rand fluctuate on inflation rate stats?
South African news has been focused on future growth forecasts, which have been mixed for the 2017 estimates.
Catalonian Worries bring EUR ZAR Exchange Rate Losses
Although today’s Eurozone industrial news has been positive, the Euro has still fallen by -0.4% against the South African Rand today.
This decline follows the news that a deadline has been imposed on the Catalonian government. This has come from Spain’s Prime Minister, Mariano Rajoy.
Speaking on Wednesday, Rajoy demanded that Catalonian President Carles Puigdemont clarify whether he was officially declaring independence or not, within 5 days.
Attempting a diplomatic approach, Rajoy added that;
‘This call, ahead of any of the measures that the government may adopt under Article 155 of our constitution, seeks to offer citizens the clarity and security that a question of such importance requires.
There is an urgent need to put an end to the situation that Catalonia is going through, to return it to safety, tranquillity and calm and to do that as quickly as possible’.
For context, the mention of Article 155 can be construed as a threat, as it allows the Spanish government to seize control of regional administration in the event of unrest.
Positive news from the EU has failed to trigger Euro gains. In August, it has been reported that industrial production has risen on the month and the year, above forecasts in both cases.
Rand Prints Higher on World Bank Outlook
A positive forecast from the World Bank has supported the South African Rand today, with the bank estimating improving conditions in the future.
According to the bank, South Africa could soon see a reduction for the current account deficit, as well as a continued national trade surplus.
The bank believes South Africa will see 0.6% growth in 2017, although elsewhere the International Monetary Fund has cut its forecast from 1% to 0.7% for 2017.
EUR ZAR Exchange Rate Predictions: Euro may recover if ECB Officials turn Hawkish
The Euro may face high volatility this afternoon, depending on the overall tone of a range of European Central Bank (ECB) speeches.
Key officials like President Mario Draghi and policymaker Peter Praet will be speaking, along with fellow ECB members Benoit Coeure and Sabine Lautenschlaeger.
The ECB will be holding a policy meeting and press conference on October 26th, which could bring confirmation of tightening monetary policy in the future.
If today’s cluster of speeches bring any hints of such an announcement, then the Euro could rally against the Rand.
The next high-impact South African news won’t come until October 18th, when inflation rate figures for September will be released.
On the year, a minor decline is expected while a month-on-month rise from 0.1% to 0.2% has been forecast.
If core inflation remains around 4.6%, this would keep it in the South African Reserve Bank’s target range and could bring Rand gains.
Current Interbank EUR ZAR Exchange Rates
At the time of writing, the Euro to South African Rand (EUR ZAR) exchange rate was trading at 15.9795 and the South African Rand to Euro (ZAR EUR) exchange rate was trading at 0.0625.