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Euro to South African Rand (GBP/ZAR) Exchange Rate Rises as South Africa Re-Enters Lockdown on Covid-19 Fears

EUR/ZAR Exchange Rate Edges Higher as Investors Shun South African Rand

The Euro to South African Rand (EUR/ZAR) exchange rate edged higher today, with the pairing currently trading around R19.158.

The South African Rand (ZAR) struggled to gain against the single currency today after the South African Government reimpose its lockdown and introduced a night-time curfew to limit pressure on hospitals.

As a result, ZAR investors have become increasingly worried that the South African economy could have a much slower rate of recovery than had been previously expected.

Roberto Mialich, a currency strategist at UniCredit Bank, Milan, commented:

‘Concerns about the COVID-19 pandemic – new cases are steadily rising in the US; Melbourne has just announced another six-week lockdown – are still preventing risk-on sentiment from spreading much more across markets and currencies.’

Rising concerns over a second wave of Covid-19 limiting large economy has reduced market demand for riskier assets. Consequently, the risk-averse South African Rand has is struggling as investors begin to seek out safe-haven currencies instead.

South African President Cyril Ramaphosa commented on Sunday that the Government had ramped up steps to tackle the coronavirus. However, Mr Ramaphosa also caused alarm, saying:

‘The coronavirus storm is far fiercer and more destructive than any we have known.’

Euro (EUR) Rises as Hopes of Levelling German Economy Grow as Economic Sentiment Improves

The Euro (EUR) gained on the South African Rand (ZAR) today despite weaker-than-expected Eurozone economic data. Today saw the release of the German ZEW Survey of Economic Sentiment, which fell below forecasts from 63.4 to 59.3.

Carsten Brzeski, Chief Economist, Eurozone and Global Head of Macro, was upbeat in his assessment, saying:

‘[E]ven with the worst behind, today’s ZEW index adds to the evidence of a levelling off in the German economy. There is also truck toll mileage data which shows that activities on German highways has returned to more than 90% of the pre-crisis level, without showing any further improvement in recent weeks.’

Today also see saw the release of the Eurozone’s Industrial Production figure for May, which fell below forecasts at 12.4%. However, this improved from -18.2% and left some room for hope as the Eurozone’s economy begins to level off.

Analysts at Reuters commented on the report:

‘The limited rebound in May, when many plants reopened, suggest the recovery is limited. The fall in April was also bigger than initially estimated by Eurostat, which on Tuesday revised its month-on-month data to -18.2% from -17.1%.’

EUR/ZAR Outlook: Could ZAR Continue to Suffer as Covid-19 Fears Rise in South Africa?

South African Rand (ZAR) investors will be looking ahead to tomorrow’s release of the South African Consumer Price Index for May. If South Africa’s inflation data improves, then we could see ZAR claw back some of its losses.

With few Eurozone economic data releases due until Thursday – which wills see the European Central Bank (ECB) announces its interest rate decision – EUR investors will be paying close attention to risk-sentiment.

As a result, we could see the Euro (EUR) continue to gain if fears grow over the possibility of a second wave of the coronavirus.

The EUR/ZAR exchange rate will likely edge higher this week, with investors becoming increasingly concerned over South Africa’s economic outlook as the nation re-enters a widespread Covid-19 lockdown.