Euro to South African Rand (EUR/ZAR) Exchange Rate Forecast: Could EUR/ZAR Rally on Higher German Inflation?

Optimism about Eurozone Inflation Upgrade Enables EUR/ZAR Exchange Rate Rise

The Euro to South African Rand exchange rate has seen a minor rise today, ahead of what could be a strong close for the week.

The latest Eurozone data hasn’t been entirely supportive, as industrial production levels in February have missed forecasts.

Monthly production levels slowed across the single currency bloc. Although the annual reading for January was revised up from 2.7% to 3.7%, February’s reading dipped to 2.9%.

French Inflation Upgrade Boosts Euro to Rand (EUR/ZAR) Exchange Rate ahead of Eurozone Inflation Stats

More concretely, the Euro to Rand exchange rate has been supported recently by news that finalised French inflation rate data has been revised up for March.

France is the second-largest economy in the Eurozone and while it doesn’t have the same clout as Germany, higher inflation here could still impact the overall Eurozone reading.

The French upgrade pushed year-on-year inflation levels to 1.7%, which is nearly the highest rate seen in five and a half years.

Rand to Euro Exchange Rate (ZAR/EUR) Slides on Land Reform Worries

The latest South African Rand to Euro exchange rate decline is down to rising uncertainties about plans to implement widespread land reform across the country.

The act of ‘reforming’ is seen by some as a disguise for the highly controversial act of confiscating land from white ownership.

Land ownership was most unequal between whites and blacks under apartheid, but some see these redistribution plans as a return to the worst excesses of the apartheid era.

The Rand was previously strengthened earlier in the week, when fears of a US-China trade war faded slightly.

Euro to South African Rand Exchange Rate Forecast: Are EUR/ZAR Gains Ahead on German Inflation Data?

There is a chance for further Euro to Rand exchange rate gains before the weekend, as a pair of high-impact Eurozone data releases are due out tomorrow.

Coming in the morning will be the finalised German inflation rate reading for March, which is tipped to show an upwards revision during the month.

Higher inflation in Germany may be indicative of higher inflation across the Eurozone, which in turn could increase the chances of the European Central Bank (ECB) raising its interest rates.

The current ECB inflation target is 2%, while March’s overall Eurozone inflation rate was previously estimated to be in the region of 1.1%.

Additional support for the Euro may come slightly later than the German inflation rate figures, when February’s trade balance reading for the Eurozone is announced.

Current expectations are for a sizable expansion of January’s surplus, from €3.3bn to €20.2bn.

ZAR/EUR Looks to Inflation Data for Support

On the other side of the currency pairing, the South African Rand could also be affected by inflation data on 18 April, along with retail sales stats.

ZA inflation levels are expected to have fluctuated during March, which could lead to volatile Rand movement.

There may be more support provided by South African retail sales figures for February, which are expected to show a major surge for the monthly and year-on-year readings.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon