EUR/ZAR Exchange Rate Falls on Negative Eurozone Economic Data
The Euro South African Rand (EUR/ZAR) exchange rate fell by -0.6% today following downbeat Eurozone economic data, with the German Markit PMI composite figure falling deeper into contraction territory from 49.1 to 48.5.
Chris Williamson, Chief Business Economist IHS Markit, was downbeat in his analysis:
‘The deteriorating picture is being led by a downturn in Germany, but France and Italy are also close to stalling and Spain has seen growth slow to the joint-lowest in around six years. The growing risk of recession, coupled with a further moderation of inflationary pressures, will add to expectations that the ECB will need to do more to stimulate the economy in coming months.’
As a result, the Euro fell against the South African Rand on mounting fears that the European Central Bank (ECB) will proceed with further stimulus measures in the near term. This has also been compounded by increasing concerns that the German economy could face a recession in the final quarter.
In European political news, uncertainties surrounding the UK Brexit deal are leaving many Euro traders feeling cautious. This follows the European Parliament’s rejected of British Prime Minister Boris Johnson’s proposed Brexit deal, which may compromise Ireland’s Good Friday Agreement.
ZAR/EUR Exchange Rate Edges Higher, South African Vehicle Sales Increase in September
The South African Rand (ZAR) has continued to benefit from yesterday’s release of September’s South African total new vehicle sales figure, which rose from 45.484 to 49.191.
The National Association of Automobile Manufacturers of South Africa (NAAMSA) said in its statement:
‘Although vehicle exports declined during the month compared to the corresponding month of last year, exports remain the main driver of vehicle production activity in the domestic market. The vehicle export momentum remains upward with the industry on track to achieve a new record in 2019.’
US-China trade tensions, however, are remaining in focus to risk-averse ZAR traders, with the two superpower’s relations in a state of uncertainty ahead of the scheduled Washington talks this month.
Zhang Baohui, Professor of Political Science from Lingnan University, Hong Kong, commented:
‘If [Trump’s] goal is to contain China, the room for the concessions needed from the US to reach a deal is small. And many China analysts agree that the trade negotiations are not about addressing unfair trade, but rather about containment and decoupling to contain China’s rise.’
EUR/ZAR Outlook: Could the Euro Rise on Brexit Extension?
Euro traders will be looking ahead to tomorrow’s speech by Luis De Guindos, the Vice President of the European Central Bank. Any dovish comments about the state of the Eurozone’s economy could weigh on the EUR/ZAR exchange rate.
US-China trade relations will remain in the spotlight for South African Rand traders, with no SA economic data releases due until next week.
The EUR/ZAR exchange rate, however, could edge higher if the EU grant the UK an extension to Article 50, effectively delaying Brexit until a later date. As a result, this would bolster confidence in the European currency as this would lower the chances of a no-deal.