The Euro to South African Rand (EUR/ZAR) exchange rate strengthened at the beginning of the week, achieving a high of 13.2972, even as the Greek debt crisis came no closer to resolution.
It had been hoped that a gathering of European officials, taking place on Monday evening, would see Greece reach an agreement with its creditors.
However, the Eurogroup’s proposal (that Greece should accept an extension of its current bailout programme while the negotiations continue) was met with a flat refusal and the talks were swiftly concluded.
However, the market failed to react to the development, clearly believing that a solution will be struck upon before Greece runs out of money at the end of February.
Demand for the Euro was also heightened by impressive German confidence data.
The ZEW Centre for European Economic Research published its Economic Sentiment and Current Situation surveys for the Eurozone’s largest economy this morning. The measure of analyst/investor expectations advanced from 48.4 to 53.0 in February – slightly lower than the figure predicted but still a marked improvement and the strongest level of investor confidence for a year.
The gauge of the Current Situation also showed a marked increase, rallying from 22.4 to 45.5, and the Eurozone’s own Economic Sentiment index advanced to 52.7 – aiding the Euro’s uptrend.
The Rand, meanwhile, was feeling the pressure ahead of the publication of domestic inflation and retail sales figures. As South Africa relies on the Eurozone for trade, the uncertain Greek debt situation was also taking a toll on the currency, as were persistent concerns regarding SA’s energy supply.
The emerging-market currency was holding in a fairly steady position against the US Dollar but also declined against the Pound, drifting -0.3% to hit a low of 17.9380.
Tomorrow we can expect to see notable EUR/ZAR exchange rate volatility.
Economists have forecast that the annual rate of inflation in South Africa fell from 5.3% in December to 4.39% in January following a month-on-month slump of -0.13%.
Retail sales in the nation are believed to have increased by 0.62% in December, month-on-month, following November’s 1.5% increase.
Below forecast data could pile more pressure on the Rand.
Euro movement could also follow the publication of the Eurozone’s Construction Output figures.
Given that there are no further influential South African reports scheduled for publication this week, additional volatility in the Euro to South African Rand exchange rate is likely to be driven by the Greek debt negotiations and global economic developments.
The Euro to South African Rand (EUR/ZAR) exchange rate was trading in the region of 13.2460 during the European session.