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Euro to South African Rand (EUR/ZAR) Exchange Rate Falls as Risk Sentiment Improves

EUR/ZAR Exchange Rate Sinks as Covid-19 Vaccine News Buoys Risky Assets

The Euro to South African Rand (EUR/ZAR) exchange rate dipped today, with the pairing currently trading around R18.14.

The South African Rand (ZAR) has benefited from hopes of a rollout of a Covid-19 vaccine in the next couple of months.

As a result, demand for risky assets like the South African Rand has risen, with hopes that the global economic situation could improve.

Risk sentiment has also improved this week, however, with US political tensions settling after President Donald Trump agreed to go ahead with the transition for President-elect Joe Biden.

In South African economic news, today saw the release of the latest Consumer Price Index for October, which beat forecasts and rose by 0.3%.

Virág Fórizs, Africa economist at Capital Economics, commented:

‘Policymakers are unlikely to be overly concerned by rising inflation and the divisions on the monetary policy committee suggest that additional monetary easing cannot be fully dismissed.’

Euro (EUR) Dips as Outlook for Eurozone Economy Darkens

The Euro (EUR) has continued to suffer this week as the outlook for the Eurozone’s economy looks increasingly uncertain, with fears that the bloc could suffer a significant setback in the fourth quarter.

IHS Markit recently reported that ‘business activity fell sharply in November as countries introduced more aggressive measures’ to limit the spread of the coronavirusvirus.

The report also described the recent decline in the Eurozone’s GDP data for November, saying:

‘With the exceptions of the declines seen in the first two quarters of this year, the average PMI reading of 47.6 in the fourth quarter so far is the lowest since the closing quarter of 2012 and indicative of a steep decline in GDP.’

As the Covid-19 situation in Europe remains largely uncertain, EUR traders are becoming increasingly worried that the Eurozone could face an unprecedented contraction in the fourth quarter and in 2021.

EUR/ZAR Outlook: Could a Covid-19 Vaccine Rollout Continue to Boost the South African Rand?

Euro (EUR) traders will be looking ahead to tomorrow’s release of Germany’s GfK Consumer Confidence Survey for December.

Any signs of deterioration in the outlook for the Eurozone’s largest economy would prove EUR-negative.

Tomorrow will also see several speeches from influencing European Central Bank (ECB) policy makers.

As a result, we could see the single currency suffer if the ECB is notably downbeat in its commentary about the state of the Eurozone’s economy.

The EUR/ZAR could continue to fall this week if global risk sentiment improves on hopes of a Covid-19 vaccine rollout.