While the Euro broadly declined in the build up to the European Central Bank’s (ECB) policy announcement, the common currency was able to advance by over 0.7% against the Rand as the South African currency was pressured lower by poor Chinese data.
Earlier in the week China’s trade figures showed a sharp drop in both exports and imports, resulting in a pronounced narrowing in the Asian nation’s trade deficit.
Commodity-driven and emerging-market currencies like the Rand softened as a result of the report, and declines were exacerbated after separate Chinese Industrial Production and Retail Sales data printed below expected levels.
The Euro to South African Rand (EUR/ZAR) exchange rate achieved a high of 12.8858 during the European session.
On Wednesday the Rand proved unable to gain on peers like the Pound and US Dollar even as South African retail sales numbers impressed.
Retail sales were shown to have risen by 1.9% on the month in February, far exceeding the 0.35% monthly advance anticipated.
On the year, sales were up 4.2% – again beating expectations for a less-impressive gain of 2.03%.
After the data was published, the Rand was trading 1% lower against the Pound and lost 0.8% against the US Dollar.
The Rand held declines against the Euro even as ECB President Mario Draghi asserted that it was far too early to consider revising the current monetary policy programme.
However, Draghi did lend the Euro support when he said that the quantitative easing scheme introduced in March is having a positive impact on confidence and performance.
The ECB chief stated; ‘There’s clear evidence that the monetary policy measures we’ve put into place are effective. We expect the economic recovery to broaden and strengthen gradually.’
Before the weekend the Rand could recoup losses if the US inflation report shows a decline in consumer prices.
Such a drop might prevent the Federal Reserve from adjusting borrowing costs and increase demand for higher-risk currencies in the process.
There are a couple of South African reports to focus on next week so the Rand could be in for another few days of notable movement.
On Monday the nation is set to publish Consumer Confidence data for the first quarter. The gauge printed at 0 in quarter four of 2014, but with domestic rolling blackouts, slowing growth in China and political uncertainty in Europe all taking a toll, the measure is expected to have fallen to -4.05 in the first three months of this year.
If that proves to be the case, the Rand could be pressured lower. However, investors will also be looking ahead to Wednesday and the release of South Africa’s inflation and core inflation data for March.
The core Consumer Price Index (CPI) printed at 5.8% in February year-on-year, with non-core CPI printing at 3.9%.
Economists are anticipating a monthly acceleration of 0.27% in the non-core figure, which would take the annual inflation rate to 4.67%.
A surprising result would trigger Rand movement.
On Wednesday the Euro to South African Rand (EUR/ZAR) exchange rate was trading in the region of 12.8947.