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Strong Eurozone GDP Fails to Enable Euro to Rand Rise

The Euro has seen a -0.3% drop against the South African Rand today, although Eurozone news has been extremely positive regardless.

  • EUR ZAR rate drops to 16.8677 – ZAR EUR trades higher at 0.0593
  • Euro to Rand rate fails to improve – Supportive GDP stats cause overall Euro gains
  • Rand rises despite high-profile resignation – Uncertainty persists about free tuition
  • Euro could claw back gains on trade data – Will Rand weaken on poor sales?

The Rand’s surprising advance comes against the odds, with political turmoil currently engulfing the ZA leadership.

Euro Traders Optimistic after Reports of Eurozone GDP Growth

Germany and the Eurozone have been the main points of focus today, with both reporting higher levels of GDP growth in the third quarter.

The initial German GDP estimates have risen above forecasts, while Italy has also seen higher reported GDP growth.

For the overall Eurozone reading, annual GDP growth has risen from 2.3% to 2.5%, more than outweighing the negative quarter-on-quarter movement from 0.7% to 0.6%.

Even higher German economic sentiment hasn’t been enough to allow a Euro to Rand advance.

The ZEW indexes for economic sentiment and current conditions in November both rose, prompting this statement from ZEW President Achim Wambach;

‘This favourable economic climate should be used to create a stronger and more robust basis for future growth’.

Rand to Euro Rate Rises despite Political Upsets

The Rand has defied the odds today, posting significant gains against the Euro, Pound and US Dollar.

In political news, the long-standing head of the Treasury budget, Michael Sachs, has resigned.

Sachs apparently left his post because of interference from the South African leadership, potentially as high up as President Jacob Zuma.

The tipping point was supposedly free higher education.

The Zuma administration has been pushing for this revolutionary reform, but Sachs allegedly thought it would disrupt the budget too much.

The situation is currently unclear – if Zuma announces a real push for free higher education then the Rand could tumble, given the potential upheaval it would cause.

This may be why the Rand is trading higher today – with nothing officially confirmed, there is still a chance that the highly disruptive no-fee plan will not be touted by the leadership.

For all his notoriety, it seems there are still positive actions that President Zuma can take regarding the economy, which might be what traders are holding out on.

Euro could Power through on Wednesday’s Trade Balance Stats

The next Eurozone news to watch out for will come on Wednesday morning, consisting of the Eurozone-wide trade balance reading for September.

Estimates are for a significant expansion in the current surplus, from 16.1bn to 25.1bn.

If the Euro is still being lifted by today’s GDP data when the trade data comes out, this could lead to a substantial EUR ZAR advance.

South Africa’s weekly economic news will consist of retail sales stats on Wednesday.

Estimates are for lower reported sales on the month and year in September; such results could devalue the Rand.

Current Interbank EUR ZAR Exchange Rates

At the time of writing, the Euro to Rand (EUR ZAR) exchange rate was trading at 16.8677 and the Rand to Euro (ZAR EUR) exchange rate was trading at 0.0593.