Weak Rand Enables EUR/ZAR Exchange Rate Rise Today
In domestic news, Euro to Rand exchange rate gains have been limited by ongoing budgetary issues between Italy and the rest of the European Union.
Italy’s coalition government has put forward an ambitious budget that exceeds EU spending laws – making matter worse, there has been a proposal to ditch the Euro.
League Party member Claudio Borghi has suggested that Italy could benefit from having its own currency, a concept that is abhorrent to other Eurozone members.
Italy used the Italian Lira before joining the Eurozone, but the notion of reverting back to this currency has unsettled traders and caused Euro losses elsewhere.
South African Rand to Euro (ZAR/EUR) Exchange Rate Slides on IMF Funding Forecast
The South African Rand (ZAR) has fallen against the Euro (EUR) and peers like the Pound and US Dollar today, having been weakened by low trader confidence.
ZAR investors have been rattled by recent economic forecasts, which suggest that International Monetary Fund (IMF) aid could be required in the future.
The South African National Planning Commission (NPC) has warned that if high national debt is not tackled, the IMF may have to be called in.
The NPC’s latest report has focused on how economic efficiency could be improved in the future, with analysts saying:
‘The bad news is that we have stalled once again. The good news is that it is within our power to fix it.
‘It will not be possible to continue on this path. We will need to restore the country to a growth path with higher tax-collection rates, public-sector efficiency and improved service delivery per Rand spent.
‘South Africa has limited space to manoeuvre, taking into consideration that the country is currently trapped in a low growth path, which implies less revenue being collected in the future.’
Euro to South African Rand Exchange Rate Forecast: Are EUR/ZAR Gains ahead on Rising Retail Sales?
The Euro (EUR) will have a mixed set of data out on Wednesday, with finalised September PMI stats coming out alongside retail sales figures for August.
The PMI readings aren’t expected to be entirely positive – current expectations are for an overall composite slowdown but a services PMI rise.
The retail sales readings could be the saving grace of Wednesday’s data releases, as they are tipped to show faster activity on the month and the year for August.
South African Rand traders will also be watching out for PMI data on Wednesday; the morning will bring the Standard Bank PMI reading for September.
The Standard Bank PMI measures private sector economic activity, covering areas of national importance like mining output.
This is expected to show an improvement in monthly activity levels, with a rise from 47.2 points to 49.
Such a result would leave South African activity levels in the contraction range, but a move closer to the plus-50 point growth range could still boost Rand demand.