South African Rand Exchange Rates Retreat as Risk Sentiment Wanes
Limited demand for ZAR is also due to a decline in positive political sentiment, with hopes that Deputy President Cyril Ramaphosa will win the party’s presidential race no longer as high as they were.
Andre Botha at TreasuryOne said;
‘The smart money is on rand consolidation and a tight trading range with a slight bias to a weaker rand.’
Further weighing on the Rand this morning was the release of the South Africa’s latest gold production figures.
With the precious metal being one of the nation’s key exports, the news that gold production output unexpected contracted -0.9% in October was another blow to ZAR.
Euro Exchange Rate Gains Trimmed by German Industrial Production Figures
However, the Euro was forced to relinquish some of this morning’s gains against the Rand (EUR/ZAR) after the release of some lacklustre industrial figures from Germany.
According to data published by the Economy Ministry in Berlin, industrial production slipped again from -0.9% to -1.4% in October, falling well below expectations of a rebound to 1% growth.
This was the second consecutive month of contraction and a disappointing start to the fourth quarter for businesses.
The drop also appeared to be in direct contrast with the recent uptick in factory orders which would traditionally prompt a rise in output, with Claus Vistesen, head Eurozone economist at Pantheon Macroeconomics, suggesting that the reading was ‘inexplicably poor’.
However, despite the unexpected decline, many analysts remained upbeat, looking towards the recent growth in the German economic as a sign that it is too early to be worried.
Carsten Brzeski, ING’s chief economist for Germany said;
‘Looking at the bigger picture, despite today’s drop, developments over the year 2017 so far confirm that the weak spots of the past few years – investment and industrial production – have gradually returned as a strong growth engine.’
EUR ZAR Exchange Rate Forecast: German Trade Surplus to Rise Again?
Looking ahead, the EUR ZAR exchange rate may continue to strengthen on Friday with the release of Germany’s latest trade balance data, with economists forecasting that figures will show that Germany’s trade surplus rose again in October.
Meanwhile, ZAR investors will start looking towards the release of South Africa’s own trade figures next week, with investors likely to welcome an expected narrowing of the country’s trade deficit in the third quarter.