The Euro South African Rand (EUR ZAR) exchange rate found its feet again this morning as EU lawmakers “overwhelmingly” voted to lift the EU parliamentary immunity of Marine Le Pen for tweeting graphic pictures of Islamic State violence.
The far-right Le Pen, who is running in the French Presidential elections is also a member of the European Parliament and currently has immunity regarding posts she made to the social media platform Twitter in 2015.
The images, which include the beheading of a US journalist, have been under investigation by the French judiciary who contacted the EU parliament’s legal affairs committee to seek the lifting of her immunity.
While the initial committee vote will require the backing of the rest of Parliament in a second vote, observers expect that it should have little problem finding the support it requires to pass.
Once her immunity is lifted Le Pen will be prosecutable under the offense of ‘publishing violent images’, which in France can carry a penalty of up to three years in prison and a fine of €75,000.
Len Pen is seen as a major threat to the stability of the Eurozone as she promises to hold a referendum on France’s EU membership if she is elected in May, something that could be a major blow to the Euro if it leads to the exit of the Eurozone’s second largest economy.
Investors hope that the legal action against her could see some of her support wane, prompting this morning’s rise in EUR ZAR.
Conversely, the charges could embolden her supporters as Le Pen decries the investigation as political interference, voters may see it as another scheme by the political elite to block any threat to their grip on government.
The Euro was also strengthened this morning by the rise of the Eurozone Consumer Price Index.
The latest data shows that the inflation rate reached 2% in February, up from 1.8% at the start of the year and reaching a four-year high.
With the Eurozone inflation rate now meeting the European Central Bank’s (ECB) targets, calls for the central bank to raise Eurozone interest rates are likely to become even more prevalent and although ECB President Mario Draghi is unlikely to hike rates any time soon, it could lead to the Bank tapering its quantitative easing programme.
Meanwhile the South African Rand was subdued this morning as experts predict that South Africa’s tax shortfall could be even larger than expected despite the latest budget attempting to plug the gap by taxing the highest earners.
Kyle Mandy Director at auditing firm PriceWaterhouseCoopers (PwC) suggests that the R30bn shortfall is likely to be closer to R38bn this year, while also warning that the reliance on personal income tax is unsustainable.
Markets fear that this could cause South Africa’s credit rating to be downgraded to junk status when it reviewed in April.
Looking ahead to the remainder of the week, the EUR ZAR exchange rate is likely to continue climbing as Friday brings the release of Germany’s latest Retail Sales figures, with analysts forecasting that sales will have recovered in January, rising from -1.1% to 0.7%.
This jump will likely be reflected in tomorrow’s Services PMI data as markets expect the services sector to have grown across the Eurozone last month.
The South African Rand is likely to put up little resistance tomorrow as the domestic Standard Bank PMI is expected to slide for a second consecutive month in February.
Current Interbank Exchange Rates
At the time of writing the EUR ZAR exchange rate was trending around 13.76 and the ZAR EUR exchange rate was trending around 0.07.