Euro to South African Rand Exchange Rate Fails to Hold Gains Despite Stronger Eurozone Data
Updated 11:10 BST 14/08/2018:
Market reaction to the Eurozone’s latest Gross Domestic Product (GDP) growth data was subdued, despite the data beating forecasts, and the Euro to South African Rand (EUR/ZAR) exchange rate continued to trend near the week’s opening levels of 16.12.
The Eurozone’s latest Q2 growth projections beat forecasts in both quarterly and yearly prints, coming in at 0.4% and 2.2% respectively. ZEW’s August economic sentiment surveys for the Eurozone and Germany beat forecasts too.
However, as Eurozone industrial production data from June fell short of forecasts and worsened concerns about the impact of US trade protectionism on the Eurozone economy, the Euro (EUR) was unable to benefit from the day’s data.
The South African Rand (ZAR) continued to be supported by the broad market rebound in emerging market currencies.
[Published 09:35 BST 14/08/2018]
Euro to South African Rand Exchange Rate Slides in Profit-Taking Rebound
The market’s selloff of emerging market currencies may be over – for now – as the Euro to South African Rand (EUR/ZAR) exchange rate fell back to near the week’s opening levels on Tuesday morning.
As Turkey’s perceived currency crisis worsened over last week, EUR/ZAR climbed from 15.40 to 16.12 throughout and briefly surged to a high of 17.41 when markets opened on Monday.
This was EUR/ZAR’s best level in over two years – since May 2016 – but it was very short-lived and the pair quickly fell back towards the week’s opening levels again. At the time of writing on Tuesday morning, EUR/ZAR did trend near the week’s opening levels.
Days of shockingly sharp Turkish Lira (TRY) selloffs dragged other emerging market currencies, like the South African Rand (ZAR), lower with it. On Tuesday, speculation that this issue was unique to Turkey helped other emerging market currencies like the Rand rebound from their cheapest levels.
As for the Euro (EUR), it saw limited strength as investors anticipated Tuesday’s key Eurozone ecostats, including Eurozone growth projections and economic sentiment survey data from ZEW.
Euro (EUR) Exchange Rate Strength Limited in Response to Mixed Eurozone Data
Demand for the Euro was limited on Tuesday morning ahead of the Eurozone’s overall growth projections, especially as the day’s data so far had been mixed.
Germany’s Q2 Gross Domestic Product (GDP) growth projections especially had missed both projections slightly.
The quarter-on-quarter figure was forecast to remain at 0.3%, but instead the previous figure was unexpectedly revised higher to 0.4% and the Q2 figure came in at 0.5%.
On the other hand though, the previous yearly stat was unexpectedly revised lower from 2.3% to 2.1%, and the Q2 yearly result printed at 2% instead of the forecast 2.1%.
July’s final German and French Consumer Price Index (CPI) results met forecasts in every notable print. This did mean that France’s monthly inflation rate had contracted by -0.1%, which likely weighed on the Euro slightly too.
South African Rand (ZAR) Exchange Rates Higher in Emerging Market Rebound
Investors had been selling emerging market currencies like the South African Rand en masse since last week due to what has been perceived as a deepening currency crisis in Turkey.
This was the primary reason for the Euro to South African Rand (EUR/ZAR) exchange rate’s climb last week, as well as the exchange rate’s wide fluctuations this week so far.
After falling significantly, investors opted to take a break from the Turkish Lira (TRY) selloff on Tuesday, to buy the currency back from its worst levels in profit-taking.
Investors also saw good buying opportunities across other emerging markets since the selloff, which has largely led Tuesday’s stronger demand for currencies like the Rand.
According to Toru Nishihama from Dai-ichi Life Research Institute Inc., the generally strong global economic outlook is likely to prevent emerging market currencies besides the TRY from falling too much:
‘After a large sell-off triggered by the rout in Turkey, some investors may have bought emerging currencies on dips,
The global economy is still expanding and that’s providing underlying support for the emerging markets.’
Euro to South African Rand (EUR/ZAR) Forecast: South African Retail Stats Ahead
While Tuesday’s Euro to South African Rand (EUR/ZAR) exchange rate movement will be largely driven by the direction of emerging market currency trade and the latest Eurozone ecostats the South African Rand may see more domestic influence in the coming days.
Wednesday will see the publication of South Africa’s June retail sales results, which will be the week’s most influential South African data.
If it beats expectations, investors may become more enthused by South Africa’s economic outlook which would help the South African Rand in its recovery rally.
However, if the Turkish currency crisis appears to worsen or analysts speculate that it could have a bigger than expected impact on other emerging markets, like South Africa, the Rand may weaken again.
Euro investors, on the other hand, will have plenty to react to in the coming days.
As well as Eurozone trade balance figures on Thursday and inflation stats on Friday, the strength of the US Dollar (USD), the Euro’s rival, may also influence the Euro to South African Rand (EUR/ZAR) exchange rate.