Favourable German Building Figures Trigger Euro to Rand Exchange Rate Rise
The Euro (EUR) has risen by 0.8% against the South African Rand today, thanks to highly supportive German construction data. This puts the EUR/ZAR exchange rate at its highest level since early May.
May’s PMI has shown the fastest pace of acceleration in the German construction sector in four months, picking up from 50.9 points in April to hit 53.9 points.
IHS Markit Principal Economist Phil Smith responded positively to the news, saying:
‘The construction sector moved up a gear in May, swimming against a tide of slower growth across both [the] manufacturing and services [sectors].’
EUR/ZAR Exchange Rate Further Supported by Rising Eurozone Retail PMI
Another positive influence on the Euro to Rand exchange rate (EUR/ZAR) today has been news of higher retail activity in May.
The Eurozone-wide retail PMI recovered last month, jumping from the contraction range at 48.6 points to growth at 51.7 points.
Highlighting the achievement, IHS Markit’s Alex Gill said:
‘The latest PMI data signalled a more positive month for the Eurozone retail sector, with sales returning to growth on both a monthly and annual basis.
‘In turn, this contributed to the sharpest round of job creation in the current 31-month sequence of hiring.’
Falling Business Confidence Index Brings Rand to Euro (ZAR/EUR) Exchange Rate Losses
The South African Rand (ZAR) has clearly struggled in trading today, falling to its lowest level against the Euro (EUR) since early May.
This deterioration has been caused by the South African Chamber of Commerce and Industry (SACCI) business confidence report for May, which has shown a decline.
The reading fell from 96 points to 94, continuing the trend of lower scores that started in January 2018.
SACCI officials remained cautiously optimistic despite the reading, saying:
‘[We] believe that once the challenge of good governance has been achieved, attention will focus on structural economic issues, placing South Africa on the road to sustainable economic recovery.’
Euro to South African Rand Forecast: Are EUR/ZAR Exchange Rate Losses ahead on Poor GDP Data?
The Euro’s (EUR) strong trading against the Rand (ZAR) today could be tested on Thursday, when high-impact Eurozone GDP data will be released.
This will consist of third estimates for GDP growth in Q1 2018, looking at both the year-on-year and quarter-on-quarter readings.
The figures are expected to confirm that GDP growth slowed in Q1 2018 compared to Q4 2017, a conclusion which might trigger a EUR/ZAR exchange rate drop.
The week’s last major piece of Eurozone data will be Friday’s German trade balance reading for April, which might further weaken the single currency.
A sizable reduction in the German budget surplus has been forecast, from €25.2bn to €18.7bn; this could lead to the Euro losing ground against the South African Rand.
The only major South African data out this week will be Thursday’s manufacturing production stats for April.
Compared to the -1.3% slump in manufacturing output seen in April 2017, the 2018 annual reading is forecast to show a 1% rise in activity, which could boost the Rand.
If the Euro declines on Thursday because of a negative reaction to GDP data, the ZAR/EUR exchange rate could rise before the end of the week.