Falling Eurozone Inflation Fails to Prevent EUR/ZAR Exchange Rate Rise
The Euro has risen by 0.7% against the South African Rand today, thanks to a weaker US Dollar pushing up demand for the more stable single currency.
Domestically, today’s Eurozone news has been negative because finalised inflation rates in February have fallen from 1.3% to 1.1%.
Lower inflation in the Eurozone means that there is a reduced chance of the European Central Bank (ECB) tightening monetary policy in the near-term.
Recent comments from ECB President Mario Draghi have firmed the conclusion that this news will reduce the odds of ECB activity, when Mr Draghi said;
‘Policymakers have to be more cautious than in the past. The severity of the crisis means that we cannot rely exclusively on traditional historical relationships’.
Rand to Euro Exchange Rate (ZAR/EUR) Slides on Reports of Growing Violence against White Farmers
The Rand to Euro exchange rate has fallen today due to rising political uncertainty, stemming from reports of attacks on white landholders in rural locations.
Since apartheid there have been underlying tensions between white and black South Africans, particularly regarding the distribution of land ownership.
President Cyril Ramaphosa has spoken of a need to restore land from white ownership to black, but insisted that this would be restrained, not ‘smash and grab’.
After reports of hostilities against white farm owners, the Rand has nosedived because of fears about a return to the atrocious violence of the apartheid era.
Euro to South African Rand Exchange Rate Forecast: Is EUR/ZAR Volatility ahead on Trade Balance Data?
There will be more high-impact Eurozone data to watch out for on the week starting 19th March, beginning with trade balance and construction output stats.
The Euro could decline when the data is released, as current forecasts are for a drop from a surplus of 25.4bn to a deficit of -6.5bn.
Trade deficits have previously occurred in January, while the rest of the year often shows surplus figures.
Despite this pattern, if Euro traders are anxious then the single currency could drop against the Rand.
Any losses may be limited, however, if the Eurozone construction output reading shows growth from 0.5% to 1.5% as forecast.
Next week’s South African data to watch out for will include inflation rate stats on 20th March and retail sales data on 22nd March.
Base ZA inflation rates are tipped to have slowed on the year but risen on the month in February, while core annual levels aren’t expected to change from 4.1%.
All of these results will leave inflation within the South African Reserve Bank’s target range of 3%-6%, so the Rand could appreciate on the news.
More easily accessible, Thursday’s retail sales data is expected to show sales growth for year-on-year and month-on-month readings in January.
Such unambiguous signs of South African economic growth could trigger a late-week Rand to Euro exchange rate rise.