Euro to South African Rand Exchange Rate Rises on Risk-Aversion
While the latest Eurozone data continued to paint a concerning picture for the Eurozone economic outlook, the Euro to South African Rand (EUR/ZAR) exchange rate trended even higher today as risk-aversion weighed heavily on the South African Rand (ZAR).
A combination of risk-sentiment and disappointing Eurozone data left EUR/ZAR tumbling from 15.86 to 15.76 last week, but this week so far the pair has recovered some of those losses.
At the time of writing today, EUR/ZAR was trending near this week’s best level of 15.83.
EUR/ZAR has been benefitting from market aversion to risky emerging market currencies like the South African Rand (ZAR), despite recent Eurozone data continuing to disappoint and the International Monetary Fund (IMF) warning of slowing Eurozone growth.
Amid a lack of notable South African data so far this week and lasting reaction to last week’s South African Reserve Bank (SARB) news, investors have had little reason to buy the South African Rand.
Euro (EUR) Exchange Rate Gains Limited as ZEW Economic Sentiment Stats Disappoint
Demand for the Euro (EUR) was stronger today due to market risk-aversion helping it to climb versus riskier currencies like the South African Rand. The latest Eurozone news actually limited the shared currency’s appeal.
This morning, ZEW published its January economic sentiment index and current conditions survey results for Germany and the Eurozone overall.
While German economic sentiment lightened from -17.5 to -15.0 rather than worsening to -18.4 as expected, the current conditions print unexpectedly worsened to just 27.6.
The Eurozone’s overall economic sentiment index only lightened from -21.0 to -20.9, worse than the expected -20.1.
It worsened concerns about the Eurozone’s slowing economy and limited the Euro’s strength today.
The International Monetary Fund (IMF) also cited slowing Eurozone growth as one of the primary reasons behind its cut global growth forecasts.
South African Rand (ZAR) Exchange Rates Sold on Broad Market Risk-Aversion
The South African Rand is a risky emerging market currency, meaning it is unappealing in times of economic or political uncertainty in global markets.
Amid a lack of fresh supportive South African news this week, the South African Rand has been unable to even benefit from cheaper commodity prices with investors more focused on concerns of slowing global growth and global trade tensions.
The International Monetary Fund’s (IMF) cut in global growth outlook dampened ZAR demand more than EUR demand, especially as the IMF also noted unexpected slowdown in emerging market economies as part of the reason for the forecast.
Other factors still weighing on global risk-sentiment included Brexit uncertainties, the US government shutdown, and of course continued trade tensions between the US and China.
South African Rand investors also continued to digest last week’s relatively dovish South African Reserve Bank (SARB) policy decision, which further limited Rand demand.
Euro to South African Rand (EUR/ZAR) Exchange Rate Investors Anticipate Major Data and European Central Bank
Tuesday’s Eurozone data was fairly influential, but even more influential Eurozone ecostats are due in the coming sessions and the European Central Bank (ECB) due to hold its January policy decision on Thursday.
French business confidence and Eurozone consumer confidence stats for January will be published tomorrow, with the Eurozone’s January PMI projections from Markit coming in on Thursday.
If the stats beat expectations, they may bolster hopes that the Eurozone economic slowdown isn’t as bad as feared. This would make EUR/ZAR more appealing towards the end of the week.
Wednesday will also see the publication of this week’s most influential South African ecostats, in the form of December’s Consumer Price Index (CPI) inflation rate report.
If the inflation rate is higher than expected, the South African Reserve Bank (SARB) could be pressured into taking a more hawkish stance which could bolster South African Rand demand.
However, with the Eurozone’s economic outlook a hot topic this week, investors are highly anticipating Thursday’s European Central Bank policy decision.
If the bank’s tone on its monetary policy outlook surprises investors, it could cause this week’s most influential Euro to South African Rand (EUR/ZAR) exchange rate movement.