The Euro to South African Rand exchange rate has seen significant fluctuations this week thanks to rapidly changing ZAR sentiment. News that South African Finance Minister Pravin Gordhan was facing fraud charges has left SA markets shaken, which looks to allow EUR/ZAR to sustain some gains this week despite mixed demand for the Euro.
Euro (EUR) Fluctuates on USD Strength, ECB Jitters
Despite the past week’s Eurozone ecostats largely beating expectations and increasing hopes for the Eurozone’s resilience against Brexit concerns, other factors have been keeping the shared currency from capitalising.
A large part of this has been market demand for the US Dollar, which surged over last week due to US Presidential election polls, as well as market futures, setting a 70% chance of a December Federal Reserve interest rate hike.
Another reason for the Eurozone’s volatility in the past week, however, has been increasing speculation that the European Central Bank (ECB) could be shifting stances on monetary easing – namely its quantitative easing program.
Markets are uncertain on whether the ECB could begin to taper off its QE program early, or continue the program until its natural end. As a result, the Euro has fluctuated.
South African Rand (ZAR) Recovery Surges on Pravin Gordhan Confidence
The Rand plummeted across the board earlier in the week as South African markets were left in shock by a sudden set of fraud charges made against SA Finance Minister, Pravin Gordhan.
Investors quickly piled back into the Rand again on hopes that Gordhan would get the charges reviewed or at least be able to keep his job. This has caused the Rand to see wide and influential fluctuations since Tuesday.
While the Rand has not recovered back to the level of strength it had at the beginning of the week, its recovery attempts continued on Friday as Gordhan dismissed the fraud charges and stated he would continue to do his job as normal.
Gordhan’s lawyers stated on Friday that he would not be seeking to review the fraud charges due to doubts that he would be given a fair hearing, which weighed slightly on the Rand’s recovery. Despite this, Gordhan continued to express confidence that he was ‘here to stay’.
EUR/ZAR Forecast: European Central Bank Meeting in Focus Next Week
The Euro could see more inspired movement in the coming week depending on the results of the European Central Bank’s (ECB) October policy meeting.
Speculation has been rife on whether or not the ECB will discuss the possibility of tapering back its quantitative easing scheme in order to offer Eurozone banks more legroom.
If the bank even hints at the possibility, the Euro is likely to soar and could easily take some value from the Rand. On the other hand, reassurance that QE would last until its natural end could cause disappointed investors to sell off the Euro, perhaps in favour of its rival the US Dollar.
As for the Rand, the status of Gordhan’s job is likely to weigh on market minds, but Rand trade could cool, at least until the story develops further.
Next Wednesday will see the publication of South Africa’s September inflation rate scores, which are expected to have increased to over 6% year-on-year. This could give the Rand support.
At the time of writing, the Euro to Rand exchange rate traded at around 15.57, while the Rand to Euro exchange rate trended in the region of 0.064.