Optimistic Forecast for Future Eurozone Growth Pushes EUR/ZAR Exchange Rate Higher
The Euro (EUR) has firmed against the South African Rand (ZAR) today, hitting an exchange rate of 16.5096.
Recent pairing losses mean that the Euro is still near a one-week low against the Rand, but current pairing movement is positive.
Euro demand has risen following the release of Markit’s Eurozone PMI estimates for August, which have shown that analysts predict higher monthly economic activity.
Giving an optimistic assessment of the data, IHS Markit Chief Business Economist Chris Williamson said:
‘The survey data indicates that the Eurozone economy looks to have continued to grow at a steady rate in August, raising hopes that the third quarter could see GDP growth match the 0.4% expansion seen in the second quarter.
‘In fact, the survey evidence suggests that the official data so far this year could yet be revised slightly higher.’
South African Rand to Euro (ZAR/EUR) Exchange Rate Losses Triggered by Recession and Land-Seize Warnings
The South African Rand (ZAR) has remained near a one-week high against the Euro (EUR) today, trading at a level of €0.0608.
Despite this positive performance, the Rand is still falling against the Euro at present due to growing concerns about a South African recession.
A recent Reuters poll of approximately 30 economists has brought the conclusion that there is a 33% chance of a South African recession in 2018.
BNP Paribas Economist Jeffrey Schultz tapped into the reasoning behind this forecast, saying:
‘The risk is that the services-driven sector, particularly financial services, fared poorly again in the second quarter, which could be the difference between whether South Africa avoids slipping into a recession or not.’
In addition to the warnings about a potential recession, the Rand has also been weakened today by concerns about land seizure proceedings.
Under apartheid, minority white South Africans claimed a majority of the country’s farmland; the new ZA government is attempting to redistribute this land.
Economic analysts predict that the plans could end up causing serious economic damage, mainly because of the consequences of seizing land without compensation.
The worry is that this land grab will dissolve trust in the government and cause banks to restrict lending, which could harm future investment.
There is also criticism that moving white farmland into black hands will not solve South Africa’s longstanding problems like poverty and low investor confidence.
Euro to South African Rand Exchange Rate Forecast: Will German GDP Stats Push EUR/ZAR Higher?
The Euro (EUR) could rise further against the South African Rand (ZAR) on Friday, when high-impact German GDP figures are due to come out.
These finalised figures will cover quarterly and annual growth readings for Q2 2018; in both cases, a faster pace of German economic growth is forecast.
Germany’s economy is so large that it is often equated with the overall Eurozone, so forecast-matching GDP growth could push the EUR/ZAR exchange rate higher.