The Euro to South African Rand (EUR/ZAR) exchange rate managed to climb by around 0.40% on Tuesday after an emergency summit of Eurozone financial leaders took place in Berlin the night before, improving bets that a Greek deal is on the cards. The Euro has been extremely sensitive to any changes in the bailout negotiations, which have been ongoing since January when left-wing government Syriza was voted into power.
One German government spokesperson commented on how the meeting had gone, saying: ‘They agreed that work must continue with real intensity. The participants in the talks were in close contact in recent days and want this to remain the case in the coming days both among themselves and of course with the Greek government.’
Friday is the new deadline for Greece as it’s due to run out of money in the next couple of weeks and has a looming International Monetary Fund (IMF) payment due at the end of this week. If Greece fails to make the payment it could lead to a default, which would see Greece leave the Eurozone. The Euro (EUR) exchange rate would be likely to sink as a result of such a scenario. Meanwhile, the South African Rand, as an emerging-market currency, has been able to regain some strength today on Greek optimism; however, the uncertainty in the Eurozone threatens to pressure the Rand lower at any moment.
Rand Merchant Bank representative John Cairns stated: ‘The Rand has been excessively hit in the generalised emerging market sell-off and may be able to make some mild gains today, but the overall trend is towards weakness in an event filled week. Greek concerns will remain in focus. Expect attention and global risk aversion to rise ahead of Friday, even if Greece somehow manages to keep on living beyond each supposed deadline.’
Also this week, South Africa’s KAGISO Manufacturing Purchasing Managers Index (PMI) climbed out of contraction of 45.4 in April into growth territory of 50.8 in May. The surprise leap was a favourable development for the nation, which has experienced lower morale and rolling blackouts in recent months. Additionally, Total New Vehicle Sales rose by 47868 in May following April’s positively revised 44254.
Tuesday’s going to be a big day for Eurozone data with the release of the Eurozone Consumer Price Index later in the session. Additionally, Tuesday morning saw the release of German Unemployment Rate and Unemployment Change data. While the Unemployment Rate remained in line with forecasts at 6.4% in May, German Unemployment Change registered a -6K figure, slightly shy of the forecast -10K.
The Euro to South African Rand (EUR/ZAR) exchange rate is trending in the region of 13.4714.