The single currency is trending within a narrow range against the South African Rand, and both currencies are weak versus their major counterparts. A headwind in the form of increased fears regarding Greek woes and the prospect of an exit from the currency bloc is weighing on Euro investment. The Rand, meanwhile, softened in response to speculation of a benchmark rate cut from the South African Reserve bank (SARB).
On Tuesday, the Euro softened versus many of its currency rivals after Greek officials reiterated their stance on not crossing electoral red-lines with regard to stronger austerity measures. With many now speculating that the fallout from a Grexit would be minimal, the potential for Greece to leave has heightened significantly. The general uncertainty is weighing heavily on investor confidence. Although the common currency is still trending in a weak position, positive domestic data saw the shared asset edge higher versus some of its peers. The German Consumer Confidence Survey came in at 10.2 in June; eclipsing the median market forecast of a drop from 10.1 to 10.0. The appreciation has been generally laboured, however, with the geopolitical tensions in Europe still dominating investor focus.
The South African Rand, meanwhile, fluctuated versus its closest competitors on Tuesday after producing mixed domestic data results. On the year, first-quarter growth of 2.1% bettered estimates and the quarterly figure was broadly in line with economists’ predictions. However, unemployment data was far less impressive. First-quarter Unemployment came in at 26.4%, a large increase over the market consensus of 25%. The number of Unemployed Persons jumped from 4.901 million to 5.535 million in the first quarter. Wednesday has seen the Rand continue to decline as the market struggles to digest the extent of the nation’s unemployment issues. Additional depreciation can be linked to SARB Deputy Governor Kuben Naidoo’s hints that there is a high likelihood of policy easing over the next few meetings.
Looking ahead, there will be several influential domestic data publications over the remainder of the week with the potential to provoke EUR/ZAR volatility. However, of most significance will be the G-7 meeting in Dresden. Although the schedule does not include discussions about Greece, the likelihood that the seven officials will be able to refrain from addressing the issues is slim-to-none. On Thursday; the German Import Price Index, Eurozone Confidence data and the South African Producer Price Index will be of interest. Friday’s German Retail Sales, Italian Gross Domestic Product, South African Private Sector Credit and South African Balance of Trade will be significant in terms of initiating EUR/ZAR movement.