The past week has seen the Euro to South African Rand (EUR/ZAR) exchange rate reach its best rate in over 10 years, culminating in a record-breaking high of 15.6766 on Thursday. The gains of the Euro coincided with a major devaluation of the Rand, mostly due to the diving price of gold and platinum. Gold dropped from over $1120 per 100 ounces on September 8
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to below $1106 on September 9
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, while the cost of platinum fell from just over $1000 to almost $980 over the same period of time.
Overall, the Euro had a precipitous week against the Rand, with the aforementioned historic high being preceded by a weekly low of 15.1330. The Euro fell to this figure on account of the ‘State of the Union’ speech by European Commission (EC) President Jean Claude-Juncker.
In his address, Juncker set the record straight on the Greek situation. Referring to the tenuously reached bailout agreement obtained last month, Juncker said; ‘Trust has started to be regained, even though it remains very fragile.’ On the possibility of the manipulation or alteration of the bailout conditions, Juncker was entirely inflexible, declaring that ‘I expect them to stand by their word and deliver on the agreement – whoever governs’. This didn’t bode particularly well for former Greek Prime Minister Alexis Tsipras, who has structured his re-election campaign on ‘softening the edges’ of the bailout and changing agreed-upon policies.
This week has so far been quiet for the Euro, with the Eurozone annual Industrial Production score being met with a muted reception yesterday despite exceeding forecasts. For the Rand, a contraction of the South African trade deficit has recently pushed down the Euro in the pairing, seeing the exchange rate trend in the region of 15.2000.
For the rest of the week, Euro/South African Rand exchange rate movement may occur as a result of the Eurozone CPIs for August, the South African Retail Sales figures for July and the US Federal Open Market Committee (FOMC) interest rate decision.
The Eurozone inflation rates have a somewhat better forecast, as although the annual and core variants are expected to stagnate, the monthly figure is predicted to rise from the previous printing of -0.6% to 0%. The South African Retail Sales figures have also been optimistically forecast, with a monthly rise from 0.1% to 0.72% and a minor yearly slowdown from 3.5% to 3.08%.
The biggest of these releases, however, is the US Fed interest rate decision. In a change from the past few months, (some) forecasts actually have the Fed finally raising interest rates from 0.25% to 0.38%; should this occur, the US Dollar would obviously shoot up in value, which would conversely send the Rand lower. The lack of potentially-damaging Eurozone data later in the week means that a rate rise would provide the perfect opportunity for the Euro to rally against the Rand considerably.