Gloomy 2018 South African Rand Forecast Sends EUR/ZAR Exchange Rate Higher

Downbeat South African Rand Exchange Rate Outlook from Reuters Bolsters EUR/ZAR

The Euro South African Rand (EUR/ZAR) exchange rate is trending higher today as currency analysts suggest that 2018 could prove difficult for the Rand.

At the time of writing the EUR/ZAR exchange rate is up 0.4% as the downbeat outlook weighs on Rand sentiment.

South African Rand (ZAR) Exchange Rates Weakened by Downbeat Reuters Poll

South African Rand (ZAR) exchange rates tumbled at the end of this week’s session in the wake of a Reuters poll of strategists published.

According to the poll, currency strategists forecast that Rand could weaken by over 12% in 2018 as they express concerns over the country’s economic outlook.

This is partly prompted by doubts over what impact newly elected leader of the ruling African National Congress, Cyril Ramaphosa can have on the nation’s struggling economy.

While investors initially welcomed the election of Ramaphosa market attention has now turned to whether he will be able to deliver on his promise for reform, with some suggesting that ZAR was overbought in the wake of his victory.

Piotr Matys, a strategist at Rabobank said;

‘It is still going to be a challenging year. There is some scope for the rand to appreciate, but investors will be looking closely at how quickly Ramaphosa will be able to make progress on structural reforms.’

Also denting the outlook for the Rand is whether South Africa’s credit rating could be downgraded again in 2018, with Moody’s set to review its rating in the coming months and observers fearing that it may follow S&P Global Rating in downgrading the rand’s local investment grade.

Euro (EUR) Gains Trimmed as Eurozone Inflation Slows

At the same time Euro (EUR) exchange rate gains were slowed slightly this morning by the release of the Eurozone’s latest CPI figures.

According to data published by Eurostat inflation across the Eurozone slipped from 1.5% to 1.4% in December, in line with market forecasts.

This edges headline inflation away from the European Central Banks (ECB) target rate of 2%, further highlighting the challenges the bank will face in ensuring that price pressure remains robust while also winding down its quantitative easing programme in 2018.

The slowdown appeared to be largely driven by a decline in volatile items such as energy, food, alcohol and tobacco prices.

However even when stripping out these items underlying inflation is struggling to advance, with core inflation holding at 0.9%.

EUR ZAR Exchange Rate Forecast: Eurozone Retail Sales to Rebound in December?

Looking ahead to next week, the Euro to South African Rand (EUR ZAR) exchange rate may continue to punch higher at the start of next week, with economists forecasting that the latest Eurozone retail sales figures will show that sales growth rebounded from -1.1% to 1% last month.

Meanwhile the South African Rand may find itself on the back foot again on Monday as South Africa’s latest Manufacturing PMI is expected to report that domestic factory activity slowed in December.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail