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Euro South African Rand (EUR/ZAR) Exchange Rate Rises Despite Flagging German Industry

EUR/ZAR Exchange Rate Improves, Eurozone Economic Woes Continue

The Euro South African Rand (EUR/ZAR) exchange rate rose by 0.3% today, with the pairing currently trading around R16.233 despite German factory orders falling below forecasts at -0.4% in October.

Carsten Brzeski, Chief Economist at ING Germany, commented:

‘The great order book deflation in German industry continues. [This] does not bode well for industrial production in coming months. The trade conflict, global uncertainty and sector-specific shocks are clearly weighing on German industry.’

Euro (EUR) investors are becoming increasingly jittery today, with the Eurozone’s powerhouse economy continuing to defy hopes for a factory rebound.

This follows yesterday’s publication of the IHS Markit Eurozone composite PMI which remained unchanged in October, with one commentator saying that the bloc’s economy continues to remain ‘near-stagnant’.

In Eurozone economic news today, we will see the release of the Eurozone’s final growth figure for the third-quarter, with any surprise uptick likely to prove Euro-positive.

ZAR/EUR Exchange Rate Sinks as South African Economy Teeters on Recession

The South African Rand (ZAR) fell against the Euro today after this week’s data showed that the South African economy had contracted in the third-quarter.

Reza Hendrickse, Portfolio Manager at PPS Investments, was downbeat in his analysis, saying:

‘Although technically not in recession at the moment, conditions on the ground in South Africa are undoubtedly recessionary. Growth is absent, confidence is lacking, unemployment is rising and the prevailing trend is not in our favour.’

The risk-sensitive ZAR continues to suffer from uncertainty around US-China trade negotiations, with US President Donald Trump recently saying that a deal between the two superpowers could potentially wait until after the 2020 presidential elections.

Kyle Rodda, an analyst at IG Markets, Melbourne, commented:

‘The markets feel like trade talks are on a shot-clock now: December 15 being when the buzzer blows. Anything that remotely stands in the way of a deal getting done by then will be reacted to with anxiety.’

EUR/ZAR Outlook: US-China Trade Developments to Drive South African Rand

Euro (EUR) investors will be looking ahead to tomorrow’s release of Germany’s industrial production figure for October, which is expected to improve from -0.6% to 0.1% and could boost confidence in the bloc’s factory sector.

US-China trade developments will continue to drive the South African Rand (ZAR) this week, with any signs of a ‘phase one’ trade deal being inked before the New Year likely buoying confidence in the risk-averse ZAR.