Homepage » News » EUR/ZAR » Euro to South African Rand Exchange Rate Tumbles on German Coalition Concerns

Euro to South African Rand Exchange Rate Tumbles on German Coalition Concerns

Signs of German Coalition Compromise Fail to Boost EUR/ZAR Demand

The Euro to Rand exchange rate (EUR/ZAR) has dropped by -0.8% today, while elsewhere the Euro fallen by -0.7% against the Japanese Yen and -0.4% against the US Dollar.

This poor performance is mainly down to persistent worries about Germany, which remains without an effective government.

German Chancellor Angela Merkel, who has held the office four times now, remains in the midst of difficult coalition talks with the SPD Party to try and form a coalition.

As well as making compromises between her own CDU Party and the SPD, Merkel also needs to ensure cooperation from the CSU Party, longtime partners to the CDU.

The latest update is that the CDU/CSU union and the SPD have agreed to scrap plans to lower CO2 emissions by 2020; a sign of apparent progress.

Compromise is essential in discussions, but this is only a small victory, especially as there are much more divisive issues like military spending and EU policy to discuss.

Traders seem to avoiding the Euro for now, but future agreements on trickier coalition issues could see confidence return and boost the EUR/ZAR exchange rate.

Giving a summary of recent discussions, Senior CDU official Julia Kloeckner struck a positive tone;

‘Yesterday, we worked very factually [with the SPD] and we did well. We are aware of the fiscal limitations and we are optimistic’.

German Trade Growth and Falling Eurozone Jobless Rate Fail to Support Euro

The Euro has remained down against the South African Rand today, in spite of a pair of supportive, high-impact Eurozone announcements.

The German trade surplus has risen by more than forecast in November, while unemployment across the Eurozone has fallen from 8.8% to 8.7% as expected.

This is a 9-year low for unemployment in the single currency bloc, although the 8.7% figure fails to reflect high jobless rates in countries like Spain and Greece.

Hopes for Zuma Ousting Trigger Rand to Euro (ZAR/EUR) Advance

The Rand has clearly risen against the Euro today, in addition to the US Dollar and the Pound.

There hasn’t been much economic news out of South Africa, so ZAR traders have instead been focusing on potential political developments.

Hopes are rising that President Jacob Zuma, an extremely contentious person within South African politics, could be removed from the position in the coming months.

Zuma formerly held the national presidency as well as the presidency of the ruling African National Congress (ANC) Party.

He has recently been replaced as ANC leader, however, by Cyril Ramaphosa; some analysts believe that Ramaphosa could become the next National President.

It is thought that a proposal to remove Zuma from office will be floated at an ANC meeting on Wednesday; if this is approved then the Rand could see a sharp rise in value.

Zuma has long been considered a thorn in the side of the national economy, so his removal could pave the way to reduced corruption and sweeping, beneficial reforms.

Euro to Rand (EUR/ZAR) Forecast: Recovery Possible on Strong German GDP Printing

The next Eurozone data to watch out for will come on 11th of January, consisting of Germany’s full-year GDP reading for 2017.

A Euro rally on the news isn’t out of the question, as experts predict a growth rise from 1.9% to 2.5%.

Germany has the largest economy within the Eurozone, so positive data here reflects well on the single currency bloc as a whole.

As mentioned above, if the ANC meeting on 10th January results in a move against Jacob Zuma, the Rand could appreciate against the Euro and other rivals.