The Euro (EUR) has leveled out against the South African Rand (ZAR) today and is now trading tightly in the EUR/ZAR pairing.
This decline is down to growing concern about the new Italian government, which is still yet to be officially formed.
Eurozone ministers of finance have united to implore the future government not to go wild on spending, as this could risk a financial crisis.
Emphasising the linked nature of the Eurozone, Slovakian Finance Minister Peter Kazimir said:
‘I sincerely hope that the new Italian government won’t ignore rules and take Eurozone hostage for the sake of pre-election promises.
‘That would be a very risky business.
‘Should they decide otherwise and go on a “suicide mission” and jump the ship instead, so be it … but let me be clear, you’re not alone on board of that ship.’
(Last updated 24th May, 2018)
Cautious Optimism from ECB’s Praet Triggers Euro to Rand (EUR/ZAR) Exchange Rate Rise
Good news has been in short supply today, but this hasn’t prevented the Euro to South African Rand (EUR/ZAR) exchange rate rising.
The latest source of support has been European Central Bank (ECB) Chief Economist Peter Praet, who has given a positive assessment of the Eurozone economy.
Mr Praet said:
‘There are clouds, but economic conditions are good.’
Mr Praet and other ECB officials are still unsure about the effects of spending plans for the new Italian government, but this hasn’t worsened their forecasts.
On that matter, another step has been taken towards a coalition government, with political newcomer Giuseppe Conte being approved as Prime Minister.
The next stage is for Mr Conte to select ministers for his cabinet, who then need to be approved and sworn in.
Uncompetitive Ranking for South Africa Triggers Rand to Euro (ZAR/EUR) Exchange Rate Drop
The South African Rand (ZAR) has slipped against the Euro (EUR) today, along with other peers such as Pound Sterling (GBP).
This decline for the ZAR is down to a number of factors, including a recent report on its ability to compete with other countries.
The 2018 IMD World Competitiveness Rankings have shown that South Africa languishes in 53rd place, out of a total 63 countries.
This negative assessment is down to high unemployment, a ballooning debt-to-GDP ratio and concerns about standards of education in the country.
More widely, the Rand has also faced pressure from the latest Federal Reserve minutes, which were released on Wednesday night.
These have indicated that there could be at least two more interest rate hikes from the central bank in 2018, with the next coming as early as June.
US interest rate hikes often lead to the US Dollar (USD) appreciating, which in turn lowers demand for commodity currencies like the Rand.
Euro to South African Rand Exchange Rate Forecast: Will EUR/ZAR Decline on ECB Meeting Minutes?
The next significant news that that could influence the Euro (EUR) will be monetary policy meeting accounts from the European Central Bank (ECB), out this afternoon.
The accounts will provide details about the latest meeting of ECB policymakers and could point the way to monetary policy adjustment at the bank.
Additionally, there may be some reaction to ongoing economic and political events in the Eurozone, such as reform efforts made by France.
Broadly speaking, if the accounts reveal an optimistic perception of the Eurozone then the single currency could rise against the Rand (ZAR).
On the other side of the pairing, the South African Reserve Bank (SARB) will be making its monthly interest rate decision this afternoon.
The SARB’s policymakers aren’t expected to adjust interest rates from their current level of 6.5%, however, so the Rand may not see that much movement.