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Pre-Jackson Hole Lull sees Euro to Rand Rate Climb Higher

The Euro has made clear gains against the South African Rand today, in the period before a highly-anticipated speech by European Central Bank (ECB) President Mario Draghi.

  • EUR ZAR trades up at 15.5802 – ZAR EUR rate falls to 0.0641
  • Euro appreciates on Spanish GDP stats – Volatility possible on Draghi remarks
  • Rand slides on poor economic prospects – High national poverty provokes concern
  • Euro could rally on Draghi comments – Higher US Dollar might drag on Rand

The latest Euro to Rand advance is largely a symptom of rising trader sentiment ahead of the Jackson Hole Symposium.

Euro Advances as ahead of Key Draghi Comments

Trader optimism has been the main thing keeping the Euro up today, as domestic data has been limited compared to other days this week.

The main Eurozone news has been that finalised Spanish GDP has been revised up in the second quarter, in line with forecasts.

This has pushed the Euro up by 0.3% against the Rand, although the pairing still remains down from the higher exchange rate of 15.6566 seen on Wednesday.

These gains may expand or fade in the near-term, depending on what Mario Draghi says in an upcoming speech.

South African Rand Slides on National Poverty Statistics

The Rand has declined against the Euro today, owing to a mounting level of negative sentiment in South Africa.

This has initially been triggered by the assessment that over half of the population is living in poverty, as reported by Statistics South Africa.

As well as news of mass poverty dragging the Rand down, the ZAR has also been negatively affected by a damning analysis of the economy. Looking at possible ways to stimulate economic growth, STANLIB Chief Economist Kevin Lings has stated;

‘[Even if the South African Reserve Bank cut interest rates,] it is unlikely that that on its own will lead to strong economic growth, because you are not dealing with the key thing that is undermining the confidence. [In our mind, this] relates to political uncertainty and policy uncertainty’.

With an investment recession it is going to be difficult to grow this country in terms of adding jobs, because businesses are not expanding. South Africa is trapped. We are trapped in a low-growth environment caused fundamentally by a lack of confidence. What we think in a nutshell is that the politics of this country is destroying the confidence of this country’.

This has been a particularly bleak outlook given the circumstances, because with President Jacob Zuma still in charge, ‘politics’ are likely to remain a significant drag on confidence.

Euro to Rand Turbulence Possible on Jackson Hole Remarks

The next Euro and Rand movement may come from the same place – the highly-anticipated Jackson Hole Symposium. Taking place in the US, this event brings together central bankers from around the world, including the ECB’s Mario Draghi.

The President will be speaking at the event for the first time in three years, so his comments are much-awaited by traders. If Draghi does break rank and indicate drastic monetary policy change in the future then he could trigger a sharp Euro rise.

This would only be if policy tightening was implied, however; any signs that the ECB may be prepared to ‘wait and see’ may instead lead to the Euro sliding on trader disappointment.

For the Rand, a decline could be on the horizon from Jackson Hole proceedings. If the US Dollar appreciates because of Fed speeches at the event, the Rand may be conversely devalued by the news.

Current Interbank EUR ZAR Exchange Rates

At the time of writing, the Euro to South African Rand (EUR ZAR) exchange rate was trading at 15.5802 and the South African Rand to Euro (ZAR EUR) exchange rate was trading at 0.0641.