Euro to South African Rand Exchange Rate: EUR/ZAR Forecast to see Further Losses if ECB Appears Dovish

Euro to South African Rand Exchange Rate Falls as European Central Bank (ECB) Abandons Hawkishness

A lack of supportive Eurozone data in recent sessions as well as stronger South African data has knocked the Euro to South African Rand (EUR/ZAR) exchange rate lower this week.

After opening this week at the interbank level of 14.91, EUR/ZAR briefly touched on a two-month-high of 14.96 before falling later in the week. The interbank level is now trending closer to the level of 14.75.

Amid a lack of reasons for investors to buy the Euro (EUR) in recent sessions, EUR/ZAR could fall further next week if the shared currency becomes even less appealing.

The European Central Bank (ECB) will hold its April policy decision meeting next Thursday. Analysts generally expect the bank to remain cautious, but if it is even more dovish than expected the South African Rand (ZAR) may have an easier time pushing EUR/ZAR lower.

Euro (EUR) Exchange Rates Lack Drive amid Mixed Eurozone Ecostats

Some modest political optimism in the Eurozone hasn’t been enough to keep the Euro (EUR) appealing against the South African Rand (ZAR) this week, as Eurozone economic data has been largely underwhelming.

Wednesday saw the publication of the Eurozone’s final March Consumer Price Index (CPI) results, which generally met expectations while the yearly figure fell short of projections.

The data dampened any hopes that the European Central Bank (ECB) could be pressured into taking a more hawkish tone on Eurozone monetary policy any time soon.

Other Eurozone data has been similarly underwhelming over the past week.

Eurozone construction was highly disappointing in February’s print, as were ZEW’s April economic sentiment results.

The shared currency recovered slightly from its worst levels at the end of the week on hopes that Germany and France would begin to push Eurozone reforms in the coming months, but this bullishness was limited.

South African Rand (ZAR) Exchange Rates Strengthen on Economic Hopes

Demand for the South African Rand (ZAR) has improved in recent sessions, thanks to stronger-than-expected data and continued hopes that the nation’s new government would make strides to bolster the economy.

Wednesday saw the publication of multiple key South African ecostats, including March Consumer Price Index (CPI) results and February retail sales.

Inflation was lower than expected, unexpectedly sliding from 4% to 3.8% year-on-year, making it the lowest level of inflation for seven years.

Retail sales were stronger than expected, climbing from -1.4% to 1.8% month-on-month and from 3.3% to an impressive 4.9% year-on-year – well above the forecast 2.8%.

On top of this, the International Monetary Fund (IMF) stated in the past week that its 2018 growth forecast for South Africa had risen to 1.5%.

Euro to South African Rand (EUR/ZAR) Forecast: European Central Bank (ECB) Meeting Ahead

If the European Central Bank (ECB) maintains a cautious or dovish tone on Eurozone monetary policy in its upcoming policy decision meeting, the Euro to South African Rand (EUR/ZAR) exchange rate could see further weakness over the next week.

Investors don’t expect the ECB to show any notable change in stance in its upcoming decision, but without any signs of hawkishness from the bank the Euro’s appeal will be limited.

Still, other key Eurozone stats due in the coming week could boost Euro demand if they impress.

Markit’s April PMI projections for the Eurozone will be published on Monday, followed by German confidence stats on Tuesday.

A slew of ecostats will be published on Friday too, including growth and inflation projections from France and Spain, as well as Eurozone confidence results for April.

The South African Rand is less likely to be driven by data in the coming week, but the Euro to South African Rand (EUR/ZAR) exchange rate could remain pressured if South African political news is optimistic about the domestic economy.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard