Euro to South African Rand Exchange Rate Slips as Emerging Market Recovery Continues
While emerging market currencies like the South African Rand (ZAR) have been recovering since late last week, the recovery has been limited due to US trade protectionism concerns. Still, the Euro to South African Rand (EUR/ZAR) exchange rate slipped on Monday.
Last week, EUR/ZAR climbed from the week’s opening level of 17.08 to a high of 18.07 as a relatively sturdy Euro (EUR) easily climbed against a weak Rand. This was the best EUR/ZAR level since early 2016 – over two years ago.
Since then though, the modest recovery in emerging market currencies pulled EUR/ZAR down to end the week near the level of 17.65. EUR/ZAR trended in the region of 17.02 at the time of writing on Monday.
Investors continued to buy the risky emerging market South African Rand from its cheapest levels, but geopolitical factors weighed on the currency’s recovery.
A lack of strong domestic support from South African data, as well as concerns that US-China trade tensions could worsen into a full blown trade war, meant the Euro to South African Rand exchange rate only saw modest losses on Monday.
Euro (EUR) Exchange Rates Steady as Investors Anticipate European Central Bank (ECB)
Last week’s Eurozone data was mixed, with some figures beating forecasts but others indicating that the Eurozone’s economic activity and outlook was being negatively affected by concerns of US trade protectionism.
Germany, the Eurozone’s biggest economy and a major global exporter, saw its factory activity and trade stats fall short of forecasts in July as US trade protectionism hit more than analysts expected.
German factory orders were forecast to jump to 1.8%, but instead printed another month of contractions and came in at -0.9%.
On top of the disappointing German data, the Eurozone’s overall Q2 Gross Domestic Product (GDP) growth rate projection came in at 2.1% rather than the expected 2.2% year-on-year.
With some key Eurozone ecostats disappointing investors and markets anxious that US-EU trade jitters could worsen again, investors are highly anticipating the tone the European Central Bank (ECB) takes in Thursday’s monetary policy decision.
South African Rand (ZAR) Exchange Rates Edge Higher in Emerging Market Recovery
Despite a lack of supportive South African news in recent sessions, the South African Rand has been gradually recovering alongside other emerging market currencies.
Due to political concerns in Turkey and Argentina knocking their respective currencies, and concerns about global trade amid US trade protectionism, emerging market currencies like the Rand were bearish for most of last week.
However, as emerging market currencies hit significant lows, investors bought them from their cheapest levels towards the end of the week.
This helped the South African Rand to recover in recent sessions, and this trend continued when markets opened on Monday.
Fresh concerns about a potential escalating US-China trade war limited market appetite for risky currencies like the Rand, but investors were hesitant to sell it much more either.
Euro to South African Rand Forecast: EUR/ZAR to be influenced by Data and ECB
As the Euro to South African Rand (EUR/ZAR) exchange rate’s losses on the emerging market recovery have been limited, investors are anticipating major data due in the coming session too.
Tuesday will see the publication of the Eurozone’s Q2 employment change stats, as well as Eurozone and German economic sentiment survey data for September, from ZEW.
South Africa’s July manufacturing production report will be published too.
Wednesday will follow with the Eurozone’s July industrial production results, and South Africa’s July retail sales stats.
However, the most influential news will come in towards the end of the week, especially as Thursday will see the European Central Bank (ECB) hold its September policy decision.
The bank is not expected to make any changes to monetary policy but the tone it takes on US-EU trade and the monetary policy outlook could prove highly influential.
Influential data including inflation results from Germany and France, as well as South African mining and business confidence stats, could also influence the Euro to South African Rand (EUR/ZAR) exchange rate towards the end of the week.