EUR/ZAR Plunges, Demand for Emerging-Market Assets Surges

After performing strongly earlier in the week, the Euro to South African Rand exchange rate plunged on Wednesday, driven by market-wide movements following US President Donald Trump’s firing of FBI Director James Comey. EUR/ZAR has fallen from 14.77 to 14.67 so far this week.

Euro (EUR) Fails to Benefit from Wednesday Data

The Euro has seen poor performance this week so far, largely due to investors taking profit from the shared currency’s recent highs and seeking higher yields.

Markets were highly relieved that anti-EU Marine Le Pen did not win the French Presidential election and have perceived the improvement in Eurozone stability as an opportunity to make some profits.

As investors continue selling the Euro from its highs this week, they have largely brushed over this week’s Eurozone data.

Wednesday saw the publication of France’s March trade balance, which lightened further than expected. Industrial production in France and Italy was also better than expected in March.

European Central Bank (ECB) President Mario Draghi’s Wednesday speech had no effect on Euro exchange rates either, as the influential banker largely defended the ECB’s aggressive stimulus package.

South African Rand (ZAR) Benefits from US Uncertainty

Demand for the Rand improved considerably on Wednesday as investors reacted to the latest US political news. US President Donald Trump shocked markets when he sacked FBI Director James Comey.

Markets grew concerned that this could diminish support for Trump’s proposed fiscal stimulus plans, so USD investors looked elsewhere for their yields.

Prices of gold and platinum, which make up notable chunks of South Africa’s exports, improved following the news as investors bought ‘safe haven’ assets from emerging markets.

Recent South African data has had little influence on the South African Rand.

EUR/ZAR Forecast: German Growth Stats Ahead

Thursday’s data is unlikely to inspire any changes in the Euro to South African Rand exchange rate. Instead, investors are more likely to pay close attention to US geopolitical news that could influence demand for emerging market currencies like the Rand.

Eurozone data, due on Thursday, includes Ireland’s April inflation rate, the European Central Bank’s (ECB) latest economic bulletin and speeches from ECB officials Constâncio and Praet.

Thursday also sees the publication of this week’s South African news, including March gold production, mining production and manufacturing production.

In terms of data, Friday’s session will see the publication of Germany’s key Q1 Gross Domestic Product (GDP) results and final April inflation figures. Eurozone industrial production stats from March will also be published.

Josh Jeffery

Contact Josh Jeffery