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Euro to South African Rand Exchange Rate Trends near Best Levels Since November on Broad ZAR Weakness

Euro to South African Rand Exchange Rate Benefits from South African Rand Plummets

Despite a lack of notably supportive Eurozone data this week, the Euro to South African Rand (EUR/ZAR) exchange rate has surged as the Euro (EUR) has been more appealing to investors versus plummeting rivals.

Since opening this week at the level of 15.69, EUR/ZAR briefly slumped to a 4-month-low of 15.44 before spending the rest of the week recovering.

On Thursday, a major risk-sentiment rout combined with domestic South African concerns helped EUR/ZAR surge and touch a half-month high of 16.15 before slipping slightly and trending nearer the level of 16.00 at the time of writing on Friday.

The Euro found some support in the form of German factory data on Thursday, but the Eurozone’s data has overall been underwhelming this week. The primary cause of EUR/ZAR gains this week was broad South African Dollar (ZAR) Weakness.

Euro (EUR) Exchange Rate Strength Limited as German Industrial Production Disappoints

The Euro (EUR) has lacked much in the way of domestic support or drive in recent weeks, as investors continue to fret that the Eurozone’s economic outlook is weakening.

Recent Eurozone data hasn’t done much to lighten those concerns either, with most of this week’s stats indicating that the Eurozone economy will continue to slow into 2019.

Thursday’s German factory orders and construction stats were fairly solid, as were French industrial production stats on Friday. However, Germany’s October industrial production figures were disappointing and kept pressure on the Euro.

According to Carsten Brzeski, Chief Economist at ING, the data points to issues with Germany’s economy:

‘The industrial slump over the summer months, mainly driven by production delays in the automotive industry, has once again given rise to concerns about the strength of the entire German economy.’

Instead, much of the Euro’s recent strength has been due to weakness in its rival, the US Dollar (USD), helping it to more easily gain versus plunging risk-correlated currencies.

South African Rand (ZAR) Exchange Rate Rebounds Slightly after Thursday Plummet

The South African Rand (ZAR) fell across the board on Thursday as various factors left the risky emerging market currency highly unappealing.

Global market concerns about worsening US-China trade relations deepened even further on Thursday after Huawei’s Chief Financial Officer was arrested in Canada.

The news pushed markets to sell off equities and riskier assets in favour of safer investments, which weighed heavily on the South African Rand.

However, South Africa’s domestic news concerned investors too. South Africa’s currency account deficit worsened in Q3, and a South African state-run power firm, Eskom, has been embattled in crisis.

South Africa has endured nation-wide power outages all week, which analysts expect will have a negative impact on South Africa’s economy if it continues or worsens. According to Bianca Botes, Treasury Manager at Perengrine Treasury Solutions:

‘The biggest threat to the (South African) economy remains the embattled Eskom,

The effect of an extremely strained fiscus, coupled with load shedding, spells disaster for future economic growth.’

Euro to South African Rand (EUR/ZAR) Exchange Rate Sensitive to Risk-Sentiment and Eurozone Data

Much of the Euro to South African Rand (EUR/ZAR) exchange rate’s recent gains have been due to weaker global risk-sentiment, but the Euro has been unable to capitalise as concerns about slowing Eurozone growth persist and weigh on the shared currency.

As a result, if next week’s Eurozone data impresses investors it has the opportunity to send the Euro to South African Rand exchange rate even higher.

Monday will see the publication of Germany’s October trade balance results, followed by ZEW’s economic sentiment index data for Germany and the Eurozone on Tuesday.

News later in the week may be even more influential for the Euro, as German inflation figures and the European Central Bank (ECB) interest rate decision will take place on Thursday, followed by PMI projections and Eurozone wage data on Friday.

Next week’s South African data may be influential too, with production data coming in on Tuesday and inflation figures on Wednesday.

However, shifts in risk-sentiment likely to be caused by US-China trade developments, as well as further developments regarding South African power firm Eskom, are also likely to influence the Euro to South African Rand (EUR/ZAR) exchange rate.