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Euro to South African Rand Exchange Rate Falls as Risk Sentiment Improves

EUR/ZAR Exchange Rate Sinks as ZAR is Boosted by Improving Risk Sentiment

The Euro to South African Rand fell today, with the pairing currently fluctuating around R18.16.

The South African Ran rose today as demand for riskier assets has risen ahead of tomorrow’s US presidential inauguration of President-elect Joe Biden.

As a result, demand for the safe-haven US Dollar has slipped, spiking demand for risk-sensitive currencies as markets await policies from the incoming Joe Biden administration.

Analysts at Reuters were downbeat about the outlook for the South African economy, however, commented:

‘The [South African Rand] has mainly taken its cue from global drivers so far this month, but this week South African-focused investors will look to a slew of economic data for clues on the health of the domestic economy in the last quarter of 2020.

‘The South African economy was in recession even before the COVID-19 pandemic set in, while the coronavirus crisis has exacerbated its woes.’

Consequently, ZAR traders are remaining cautious as South Africa’s Covid-19 situation remains in a critical stage.

Nonetheless, China’s recent economic data has buoyed confidence in the Chinese economy – the second-largest in the world – as this bodes well for South Africa.

China is South Africa’s largest trading partner, so any improvement in the Chinese economy is also a positive indication for South Africa’s going forward.

Euro Falls Despite Rising German Economic Sentiment

The Euro struggled today following the release of December’s German CPI data, which concerned forecasts and remained in negative territory at -0.7%.

Today also saw the release of January’s German ZEW Survey of Economic Sentiment, which beat forecasts and rose to 61.8.

ZEW President Achim Wambach said in a statement:

‘Despite the uncertainty about the further course of the lockdown, the economic outlook for the German economy has improved slightly.

‘The results of the ZEW Financial Market Survey in January show that export expectations in particular have risen significantly.’

Meanwhile, Euro investors are becoming concerned over Italy’s political situation as the Italian PM continues to battle for his coalition’s survival over the latest Covid-19 recovery plan.

As a result, Eurozone markets are becoming worried that the bloc could face further political uncertainties.

EUR/ZAR Outlook: Could Risk Sentiment Improve as Joe Biden is Inaugurated as US President?

South African Rand investors will be awaiting tomorrow’s release of the latest South African CPI data for December.

If this paints a gloomy outlook for the South African economy, then we will see the South African Rand suffer.

Meanwhile, the ZAR/EUR exchange rate will mainly be driven by global risk sentiment.

As a result, we could see ZAR head higher tomorrow as Joe Biden is inaugurated to become the next President of the United States.

Euro (EUR) traders will be monitoring tomorrow’s release of December’s Eurozone CPI data.

Any indications that the Eurozone economy could struggle to recover this year, however, would be EUR-negative.