Eurozone Unemployment Drops to Lowest Level in Almost 9 Years – Euro (EUR) Exchange Rates Bolstered
The Euro South African Rand (EUR/ZAR) exchange rate extended its climb on Thursday, supported by a robust Eurozone unemployment reading and ebbing support for the South African Rand.
According to the latest figures from Eurostat, the Eurozone’s unemployment rate printed at 8.6% in January, consistent with the market forecast and marking the lowest reading since December 2008
In addition, the number of unemployed people within the bloc dropped from 14.121 million to 14.111 million in January, ultimately illustrating that the Eurozone’s economic recovery continues to move at a reasonable pace.
It should also be noted, however, that many of the largest economies still suffer from massive unemployment levels, with Spain, for example still sitting at 16.3% and Italy (the Eurozone’s third largest economy) sitting at 11.1%.
In slightly worse news the Eurozone’s latest manufacturing purchasing managers’ index (PMI) fell to a score of 58.6, down from the previous print of 59.6 but beating the forecast of 58.5.
Nonetheless, this news did not put much of a damper on the Euro South African Rand exchange rate, with the Rand suffering from a loss in demand on the back of a poor South African trade balance reading.
South African Trade Balance Disappoints – Euro South African Rand (EUR/ZAR) Exchange Rate Capitalises
South Africa’s trade balance swung into deficit in January, effectively wiping out 12 consecutive months of surpluses as exports of major commodities and various machinery items plummeted.
The trade balance reading printed to ZAR -27.66b in January, significantly below the market forecast of a ZAR 6.1b surplus and the previous reading’s ZAR 15.3b.
Johannes Khoza, Economist at Nedbank, shared their thoughts:
‘That the deficit was larger than expected shows there are high expectations for 2018. A lot of companies are expecting more trade activities in the domestic economy’.
Whilst the Rand has gained significant support after Cyril Ramaphosa replaced Jacob Zuma as leader of the nation optimism has now slowed, with markets largely waiting for Ramaphosa to deliver on his policy change plans before buying further into the currency.
Some optimism has also ebbed on a significant policy change backed by Ramaphosa which allows the expropriation of land without compensation.
The freedom to confiscate property in this manner has caused severe anxiety amongst investors, as any investment in South Africa now comes with a heightened degree of political risk attached.
Euro South African Rand (EUR/ZAR) Exchange Rate Forecast: Italian Election and German Coalition Vote in the Spotlight
The Euro South African Rand (EUR/ZAR) exchange rate could see significant movement next week as markets respond to Italy’s general election, and Germany’s Social Democrat (SPD) vote on a coalition deal with Chancellor Angela Merkel’s Conservatives (CDU).
In Italy, anti-establishment parties are currently thriving, with the anti-EU Five Star Movement (M5S) seen as the most likely group to emerge ahead.
This is pertinent in that any party that is against Italy remaining in the EU winning could spell severe volatility for the bloc, particularly with Italy being one of the Eurozone’s largest economies.
Beyond this, at lot is at stake in Germany’s SPD vote, with a rejection of the coalition deal with Merkel liable to see Germans return to the polls – an event that (for better or worse) would cause a great deal of uncertainty and likely leave investors fleeing the single currency.
In this respect the outlook for the EUR/ZAR exchange rate is strong, for the time being, but as we move into next week expect a great deal of tumult.