Euro Rand Exchange Rate Rallies after President Zuma Receives ANC Backing

A mixture of South African developments and positive Eurozone news has boosted the EUR/ZAR exchange rate.

Last week saw the Euro rise against the battered Rand from 13.46 to 14.30.

Euro Advances on Best Post-Crisis Quarter

The Euro has risen by 0.9% against the Rand today, aided by strong signs of economic recovery in the currency bloc.

As well as output rising, new order growth has also increased significantly, to the point of nearing six-year highs.

Employment growth is also its highest in over nine and a half years, which has further bumped up the Euro against the weakened Rand.

Rand Devalued by Signs that President Zuma Will Stay

The Rand has plunged today, falling to its worst rate against the Euro since early December 2016. This follows a key African National Congress (ANC) body backing controversial President Jacob Zuma.

The latest criticism of the embattled leader comes after firing Finance Minister Pravin Gordhan. As well as this removing a generally respected and competent administrator, the move also led ratings agency Standard & Poor’s to cut South Africa’s credit rating to ‘junk’.

Although there has been fresh talk of a vote of no confidence against Zuma, the backing of the National Working Committee (NWC) within Zuma’s ANC party has made his ousting unlikely.

Zuma is often considered to have a highly detrimental influence on the national economy, due to his often reckless decisions and numerous corruption allegations.

This latest incident has so far failed to shake his position as President, making further Rand to Euro losses a likelihood.

EUR/ZAR Exchange Rate Forecast

For the rest of this week and the week to come, Euro/South African Rand exchange rate movement may occur as a result of Thursday’s Eurozone retail PMI and European Central Bank (ECB) meeting minutes, Friday’s German trade stats and Eurozone-wide confidence scores on the coming Tuesday.

The retail PMI previously dipped into contraction at 49.9; if March’s figure shows a rise back to growth at over 50 then the Euro could rally.

With the ECB’s minutes, expectations are for a muted delivery due to the ongoing French election process. If policymakers are notably optimistic or pessimistic about near-term Eurozone performance, though, the Euro could still be influenced.

Germany previously posted a trade surplus in January; if February shows an expansion then the Euro could close weekly trading up against the Rand.

While Zuma’s continued presence as President is likely to keep the Rand soft in future, the Rand could still be moved by next week’s confidence and mining data.

Consumer confidence on Tuesday will cover the first quarter, while Thursday’s mining production figures could show further positive data.

Oliver Meredew

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