The Euro to South African Rand exchange rate has been performing poorly this week due to faltering confidence in the Eurozone.
With domestic concerns have been driving the Euro, Rand direction has been dictated by global sentiment.
As evidence of how dramatically the Euro has fallen against the Rand, the single currency began the week at around 16.1021 but has since reached a low of 15.6962.
Euro Rocked by Plunging Confidence in Single Currency
The value of the Euro has fallen recently on account of rising concerns about how the single currency bloc will cope in the long-term after ‘Brexit’.
Tuesday saw a major blow to Eurozone confidence, when the ZEW surveys for July saw major drops in economic sentiment indices for the Eurozone and Germany, its most economically-powerful constituent nation.
As further evidence of how confidence in the Euro has been waning, Wednesday afternoon saw July consumer confidence drop from -7.2 to -7.9.
The issue remains for economists to speculate on whether these sharp dips in Eurozone confidence are knee-jerk reactions to the EU Referendum outcome, or just the tip of the iceberg for a more prolonged period of uncertainty among those engaging with the common currency.
South African Rand’s Value Shifted by Optimism and Pessimism in Global Markets
The ZAR/EUR exchange rate has managed to firm this week, with the South African currency also making sizable gains against rivals such as the Pound and US Dollar as well.
The South African economy received a major shot in the arm on Monday when it transpired that South Africa had risen in the African rankings to push past Egypt into the second place spot for the largest African economy, behind Nigeria.
Additional support was offered by the fact that the gap between ZA and Nigeria is a slim one, which has raised hopes among South Africans that the top spot could be seized in the near-term.
In other news, the International Monetary Fund (IMF) lessened some of the Rand’s earlier buoyancy by offering a level analysis of how South Africa’s economy might fare in the future.
While the IMF highlighted that a third of the working population was ‘effectively excluded from the economy’, it also proposed a simple solution of reducing inequality and promoting ‘economic inclusion’ to rectify the issue and boost economic growth.
EUR ZAR Exchange Rate Forecast
For the remainder of the present week, Euro/South African Rand exchange rate movement may occur as a result of the imminent European Central Bank (ECB) interest rate decision and following press conference, the South African Reserve Bank (SARB) interest rate decision (also due today) and Friday’s Eurozone PMI flashes.
The ECB decision is especially important as it comes as the first since the EU Referendum result. Current predictions are for a rate freeze at 0%, which would likely aid the Euro due to the ECB not taking a ‘hard and fast’ response.
However, the Euro could still drop this afternoon, should ECB President Mario Draghi make any particularly dovish statements in the press conference that will follow the announcement of the ECB’s decisions.
The SARB is also expected to freeze its interest rate this afternoon, at 7%. In addition, the prime overdraft rate has no change from the present 10.50% on the cards.
Looking ahead to the last day of the week, the Eurozone will contribute French, German and Eurozone-wide services, manufacturing and composite PMI flashes for July on Friday morning.
Recent forecasts have been for improvements across the board, with the French results being expected to rise out of negative ranges for the services and composite results.