The Euro has fallen against the South African Rand today but could gain considerably in the near-term against the backdrop of increasing economic volatility in South Africa and a Greek debt situation that seems resolved for the moment.
Last week saw the Euro Rand exchange rate fall from 14.23 on Monday and close trading in the region of 13.84 on Friday.
Euro to Rand Losses Follow Analysis of Greek Debt Deal
The Euro has dipped against the Rand today in the wake of an apparent breakthrough in the Greek debt crisis, which has seen the Greek government and its creditors reach an agreement.
Coming on the day of the self-imposed deadline, the agreement ties Greek officials into implementing further economic reforms in order to access the next tranche of bailout funding.
This in itself has been controversial, as some have seen the news as just another repeat of previous bailouts and debt accumulations that have plagued Greece since the late 2000’s financial crisis.
Eurozone news has been broadly positive but unsupportive, with Eurozone and German PMI flashes for February rising in all fields bar the Eurozone services gauge.
Rand Uncertainty Amplified by Pessimistic ZA Budget Forecasts
The Rand has managed a small rise against the Euro today, but this comes at an incredibly turbulent time for economic forecasts in South Africa.
In the wake of President Jacob Zuma’s controversial State of the Nation Address (SONA) which saw brawls break out in Parliament, South Africans are poised to hear another major announcement in the form of the 2017 budget.
The main focus has been on the man who will deliver the budget – Finance Minister Pravin Gordhan.
Zuma replaced Gordhan with Nhlanhla Nene in 2014, only returning him to the office of Finance Minister in 2015 after another spate of swapping.
The concern is that the budget could be rendered meaningless if Gordhan is replaced again in the future, which is not impossible given the differences that have been seen between the President and his Finance head.
EUR/ZAR Exchange Rate Forecast
For the rest of this week, Euro/Rand exchange rate movement may occur as a result of German confidence stats and Eurozone inflation figures on Wednesday, German GDP figures on Thursday and French and Italian confidence results on Friday.
South African announcements in the future will consist of the trade balance on February 28 th , a manufacturing PMI figure on March 1 st and the Standard Bank PMI on Friday.
Outside of the South African data releases, Wednesday’s national budget announcement from Finance Minister Pravin Gordhan will bear close watching, given that it could trigger a Rand crash if it looks like spending is being slashed and taxes are rising.
With the Eurozone figures, Ifo measures of confidence are expected to drop on Wednesday, while Eurozone inflation is expected to show an annual rise and monthly drop in January.
Thursday’s finalised German GDP stats are expected to be revised up, while both French and Italian confidence results are expected to remain unchanged or have risen in February.