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Euro South African Rand (EUR/ZAR) Exchange Rate Steady as Geopolitical Uncertainties Weigh on SA Markets

EUR/ZAR Exchange Rate Rangebound as August’s SA Business Confidence Eases

The Euro South African Rand (EUR/ZAR) exchange rate held steady at around R16.218 after the risk-sensitive South African currency recoiled following yesterday’s rally. This follows easing risk sentiment as US-China trade uncertainties continue to haunt SA markets.

However, China has waived imports on more than a dozen US goods for the first time since the US-China trade war began. The move comes ahead of talks set to go ahead in Washington in October, in which the two world’s largest economies aim to quell trade tensions.

Today saw the publication of August’s South African Business Confidence Index which eased from 92 to 89.1, further weighing on ZAR as the SA economy continues to struggle.

Meanwhile, Moody’s Investor Services, the major rating agency, has not downgraded South Africa to sub-investment grade, although it has downgraded the country’s 2019 growth forecast for the second time in a row.

Wayne McCurrie, a Portfolio Manager at FNB Wealth and Investments, commented:

‘SA is a pretty girl among the ugly bunch. There are problems with the economy, but the lights, courts and banking system work for most of the time. Maybe technically SA is junk, but at least the currency is not falling by 40% most of the time, the economy has not collapsed even though there is high unemployment and inflation is not at 500%. We are still standing.’

EUR/ZAR Exchange Rate Flat as July’s Spanish Industrial Output Falls Below Consensus

The Euro (EUR) failed to gain on ZAR following today’s release of July’s Spain industrial output figure, which fell below forecasts from 1.6% to 0.8%.

This also follows disappointing French, German and Italian manufacturing output data, and as a result, today’s Spanish figure has further added to fears that the Eurozone could face a recession in the near term.

In European political news, Italian Prime Minister Giuseppe Conte, along with his left-leaning coalition, won a vote of confidence in the Senate and have secured full government powers.

As the new coalition is EU-friendly, this has buoyed optimism in the Euro as the Eurozone’s third-largest economy has been effectively purged of the threat of a Eurosceptic government under former Deputy Prime Minister Matteo Salvini, leader of the League.

The EUR/ZAR exchange rate failed to benefit, however, as doubts continue to linger over the coalition’s longevity.

EUR/ZAR Outlook: Could the Euro Sink Following a Dovish ECB Rate Statement?

Euro traders will be looking ahead to tomorrow’s release of August’s German inflation figure, which is expected to hold at 1%. However, any signs of a decrease could see the Euro sink, as this would further heighten fears of a recession for the Eurozone’s powerhouse economy.

South African Rand investors, meanwhile, will be keeping a close eye on geopolitical developments. Any further flare-ups between the US and China would weigh on the risk-sensitive ZAR.

The EUR/ZAR exchange rate could likely sink tomorrow following the European Central Bank’s (ECB) interest rate decision, which is expected to hold at 0%.

However, with expectations of a dovish monetary policy following the Eurozone’s struggles in the second quarter, we could see the European currency sink against the South African Rand.