Foreign Currency Market Update – GBP / ZAR Update
The Euro to South African Rand (EUR/ZAR) exchange rate was trending within the range of 13.3208 – 13.7780 over the past week.
With geopolitical tension in Greece weighing heavily on investor confidence, the shared currency has generally declined versus the majority of its rivals over the past week. The occasional knee-jerk reaction to positive domestic data results has been overshadowed by concern that Greece will run out of money before securing bailout funds from creditors. The single currency spiked after Greece managed to repay the International Monetary Fund (IMF) €750 million on Monday, but the gains were short-lived after it transpired that Athens was forced to tap into emergency funds in order to make the payment.
The South African Rand has also generally fallen against its peers over the past week. This is the result of ongoing issues with the country’s leading energy provider, Eskom. Faulty and outdated equipment and worker strikes have caused the company to employ rolling black-outs in order to relieve stress on the aging power grid. Even the bearish US Dollar wasn’t enough to see heightened demand for the emerging-market currency.
Wednesday has seen the Euro to South African Rand (EUR/ZAR) exchange rate soften by over -0.50% however. This is due to a combination of less-than-ideal German growth data and the South African government’s plan to intervene in Eskom’s recovery.
European economic data produced mixed results on Wednesday which saw the common currency put on a mixed performance. Whilst French Gross Domestic Product improved beyond expectations, German growth data failed to meet with the median market forecast. The losses were somewhat slowed, however, after German Inflation data improved and Eurozone growth met with expectations. Additional losses can be linked to ongoing fears that Greece will run out of money before securing bailout funds, a notion solidified by the fact that Athens tapped into emergency funds in order to settle a portion of their debt to the IMF.
The South African Rand strengthened versus most of its major peers on Wednesday after the South African government flirted with methods to accelerate the Eskom recovery. They are either considering the sale of some of Eskom’s power stations or an initial public offering of shares in accordance with a Treasury official. Aiding the Rand’s uptrend is a weak US Dollar, which has seen increased demand for emerging-market assets. The Rand’s uptrend was also fuelled by Tuesday’s positive manufacturing data.
Looking ahead, South African Mining Production data due on Thursday will be of interest to those invested in the Rand. A lack of influential European economic data for the remainder of this week should see geopolitical developments dominate trade. With several economic data publications pertaining to both Europe and South Africa over the coming week, expect heightened EUR/ZAR volatility.
The Euro to South African Rand (EUR/ZAR) exchange rate softened by around -0.45% on Wednesday.
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Summary of major upcoming data releases that we think may move the market.