Euro South African Rand (EUR/ZAR) Exchange Rate Slides despite Weak ZA Business Confidence
The Euro South African Rand (GBP/ZAR) exchange rate slumped by around -0.8% on Wednesday. This left the pairing trading at around R19.7655.
The South African Rand was able to rally against the single currency despite data revealing the country’s business confidence plummeted to a seven-month low.
South Africa saw confidence plummet in March, before the full impact of the coronavirus pandemic and the country losing its final investment grade rating.
The South African Chamber of Commerce and Industry (SACCI) revealed its sentiment index fell from 92.7 to 89.9 in March.
Meanwhile the 21-day lockdown to help slow the spread of coronavirus has dampened output. The South African economy has fallen into a recession and it is estimated will contract by as much as 4% this year.
However, the latest confidence figure does not reflect the extent of damage Covid-19 has wreaked on the economy.
According to SACCI:
‘[It] mainly contains the effect of the subdued performance of the domestic economy and to some measure the effect on international trade owing to the impact of the virus on trading partners.’
Euro (EUR) Slumps as German Economy to Shrink by -9.8% in Q2
Meanwhile, the single currency slumped after research institutes revealed the bloc’s largest economy is likely to shrink by -9.8% in Q2 2020.
Joint research revealed that the German economy is likely to contract by -4.2% this year. However, the research added that the economy is likely to rebound next year.
If the research is accurate it would mean the bloc’s largest economy is set for its largest decline since records began in 1970.
Divisions Between EU Finance Ministers Remain
Added to this, EUR slipped after Eurozone finance ministers failed to agree upon a coronavirus strategy.
Ministers ended their 16 hour conference with no agreement on how to tackle the economic impact of Covid-19.
The ongoing divisions between ministers within the Eurozone has dampened single currency sentiment and sent the Euro lower against the Rand.
A new call between ministers has been scheduled for Thursday as the bloc stares at a deep recession and widespread unemployment that is to come.
Euro South African Rand Outlook: Eurozone Finance Minister Meeting in Focus
Looking ahead to tomorrow, the next meeting between Eurozone finance ministers is going to remain in focus for markets.
If there continues to be divisions between ministers in the bloc over how to tackle the economic fallout of the coronavirus, the single currency will extend today’s losses.