The Euro-Rand exchange rate has come under pressure this week, with the pairing declining from a starting high in the region of 15.94 to a closing low during Thursday’s European trading session of 15.04.
For the Rand, losses have been brought about lately by the US Federal Reserve and the tone adopted at its interest rate decision.
Euro Exchange Rate Update: ECB President Draghi Blames Excess Banks for Low Productivity
The Euro was boosted against the Rand and other rivals during Thursday’s trading session, partly due to firm comments that came from European Central Bank (ECB) President Mario Draghi.
While opening the annual European Systemic Risk Board, Draghi warned that too many banks in the Eurozone were part of the blame for the widespread problems seen in the sector, which have included Italy’s institutions struggling with debts and recent market tremors being caused by the US Department of Justice’s plans to fine Deutschebank for billions.
More concretely, Thursday afternoon saw the Eurozone consumer confidence flash for September arrive; this improved slightly from -8.5 to -8.2, bettering the expected decline to -9.2.
South African Rand News: SARB Holds Interest Rates, Fed Hints Leave ZAR Down
While the Rand has been positive over most of the week, more recently the currency has fallen in value against most of its peers, despite optimism coming from the recent South African Reserve Bank interest rate freeze.
One of the most damaging developments for South Africa’s economy has been the Federal Open Market Committee (FOMC) interest rate decision, which took place on Wednesday evening.
While the Fed once again left US interest rates on hold during the month and even cut US growth forecasts slightly, the fact that conditions for a rate hike were ‘almost ready’ meant that many economists marked December down as the time of the next rate hike.
This has essentially put immense pressure on the South African economy to stabilise in the space of just under two months, given that an interest rate increase generally results in a sharp deterioration for the value of commodity currencies such as the Rand.
EUR/ZAR Exchange Rate Forecast
Looking ahead, Euro/South African Rand exchange rate movement may take place tomorrow morning, when the Eurozone services, composite and manufacturing PMI flashes arrive, as well as on Thursday and Friday of the coming week when Eurozone confidence results and unemployment figures are due.
For both the Eurozone and German PMI flashes, positive forecasts have been made, while looking forward to the confidence printings, only a slight rise has been forecast for the business confidence result on Thursday morning.
With Friday’s August Eurozone unemployment rate figure, an unsupportive rise from 10% to 10.1% has been predicted.