EUR/ZAR Exchange Rate Edges Higher despite the Eurozone’s Economic Woes
The Euro South African Rand (EUR/ZAR) exchange rate rose by around R16.341 this morning despite the Eurozone’s growing economic woes. This follows an unexpected fall in German industrial output for July, with the figure sinking by -0.6% despite the 0.3% consensus.
The EUR/ZAR exchange rate edged higher despite rising fears of a recession for Europe’s largest economy in the third-quarter. Today’s figure has also further bolstered the case for the European Central Bank (ECB) to implement stimulus measures next week.
Paul Carrel, Reuter’s Chief Correspondent in Berlin, believes global political uncertainties are weighing on the bloc’s powerhouse economy:
‘Germany’s export-reliant economy is suffering from slower global growth and business uncertainty caused by U.S. President Donald Trump’s ‘America First’ trade policies and Britain’s planned, but delayed, exit from the European Union.’
In political news, the UK’s Brexit developments remain in focus for many EUR investors today, with the bill to extend the 31 October Brexit deadline being voted on by the House of Lords later on this afternoon.
As many analysts are almost certain that the anti no-deal bill will pass today’s vote, the EUR/ZAR pairing gained as no-deal Brexit fears continue to ease.
ZAR/EUR Exchange Rate Sinks as SA Current Account Deficit Widens in Second Quarter
The South African Rand (ZAR) remains subdued after yesterday saw SA’s current account deficit widened to R204.1 billion – or 4% of SA’s GDP – in the second quarter, dampening any optimism in the flagging economy after Tuesday’s growth figures beat forecasts.
Elize Kruger, an Economist at NKC African Economics, was downbeat in his analysis:
‘Intensifying global trade tensions could further depress South Africa’s trade performance in coming quarters and could place added pressure on the current account deficit.’
However, the South African Rand’s losses were somewhat buffered by a breakthrough in US-China trade talks, which are expected to renew in October. As China is one of South Africa’s largest trading partners, this has provided some relief for the struggling ZAR.
Carlos Gutierrez, the former US Commerce Secretary, was downbeat saying that it’s ‘a bit optimistic’ to expect any comprises between the two superpowers, with the US and China being ‘too far apart’.
China and the US announced new round of trade talks and will work to make substantial progress. Personally I think the US, worn out by the trade war, may no longer hope for crushing China's will. There's more possibility of a breakthrough between the two sides.
— Hu Xijin 胡锡进 (@HuXijin_GT) September 5, 2019
EUR/ZAR Outlook: German Trade Balance in Focus
Euro traders will be looking ahead to Monday’s publication of the German trade balance figure for July. Any further signs of a deteriorating German economy could begin to weigh on the EUR/ZAR exchange rate.
Meanwhile, South African Rand investors will be looking ahead to Tuesday’s publication of the SA Manufacturing Production Index for July.
The EUR/ZAR exchange rate could weaken next week if the German economy continues to slow down.