Fears of Italy-EU Budget Clash Cause EUR/ZAR Exchange Rate Losses
The Euro (EUR) has fallen by -1% against the South African Rand (ZAR) today, with a critical stage in Italy’s budget submission causing a panic among Euro traders.
The Italian government has been in the headlines recently for submitting a budget plan to the European Commission (EC) that exceeds spending limits.
Amid calls to rein in these spending plans, there are fears that the EC will reject the plans and make an unprecedented request for a revision from Italy’s leadership.
Italy’s Deputy Prime Minister Luigi Di Maio has declared that there is no intention to leave the European Union or give up the Euro, but tensions remain extremely high.
South African Rand to Euro (ZAR/EUR) Exchange Rate Rises on Pre-Budget Optimism
In a similar situation to the Euro (EUR), the South African Rand (ZAR) has been influenced by budgetary news today – in the Rand’s case, the mood is optimistic.
The South African currency has risen against the Euro, Pound and US Dollar ahead of the debut budget from new Finance Minister Tito Mboweni.
Offering a supportive forecast on Mr Mboweni’s plans, Nema Ramkhelawan-Bhana of Rand Merchant Bank has said:
‘Having taken up the mantle just over two weeks ago, Minister Mboweni is faced with the almighty task of having to balance populism with pragmatism as he outlines Treasury’s spending priorities for the next three years.
‘He is likely to sound all the right notes for ratings agencies by proposing cost-containment measures and further expenditure cuts, thereby reaffirming [the] Treasury’s commitment to fiscal consolidation.’
Euro to South African Rand Exchange Rate Forecast: Are EUR/ZAR Losses ahead on Lower Eurozone Confidence Score?
The Euro (EUR) is at risk of falling further against the South African Rand (ZAR) on Tuesday, when a high-impact Eurozone consumer confidence estimate is due out.
Covering the preliminary confidence measure for October, this figure is tipped to show a worsening of September’s already-negative score of -2.9 points.
If the confidence reading does shift from -2.9 points to -3.2 then the Euro could slide against the Rand.
This isn’t a foregone conclusion, however, as some economists believe that the reading will instead show an improvement with a shift to -2.6 points.
If the figure does print above expectations with a move towards a positive range, the Euro could instead appreciate against the Rand.
Rand traders will be keeping an eye on Wednesday’s Q3 consumer confidence figure and inflation rate stats for September, which could both cause ZAR/EUR volatility.
A decline in consumer confidence levels have been predicted; this could come alongside a rise in the pace of South African price growth.
Higher inflation will likely have a greater impact than the confidence data, so the Rand could appreciate on hopes for a South African Reserve Bank interest rate hike.