EUR/ZAR Exchange Rate Ticks Higher as South African Current Account Gap Expands
The Euro to South African Rand (EUR/ZAR) exchange rate is trending higher this morning as markets react a disappointing current-account reading from South Africa.
At the time of writing the EUR/ZAR exchange rate is up by around 0.2%, but still remains short of the six-month high struck earlier in the week.
South African Rand (ZAR) Exchange Rate Slumps as National Deficit Swells
The Euro to South African Rand (EUR/ZAR) exchange rate is trending higher this morning in the wake of South Africa’s latest current-account reading.
According to data published in the South African Reserve Bank’s (SARB) quarterly bulletin, the domestic account deficit swelled to ZAR-229bn in the first quarter of 2018.
This was up from ZAR-137bn at the end of 2017 and was far higher than the forecast of a more modest rise to ZAR-177bn.
The shortfall was partly attributed to the Rand’s rise at the start of the year following the surge of optimism surrounding Cyril Ramaphosa’s new presidency, which in turn made South African exports more expensive and lowered demand.
Gains in Euro (EUR) Exchange Rate Trimmed by Eurozone Reform Criticism
Meanwhile the Euro (EUR) exchange rate has found its advance slowed somewhat this morning as Germany’s ruling coalition continued to show divides over the recent reform blueprint signed by Chancellor Angela Merkel.
The reforms are part of French President Emmanuel Macron’s push to shore up the stability of the Eurozone, and involve the creation of a common budget for the currency bloc.
However this has faced significant criticism from some parts of Germany’s coalition government, who feel Germany will be burdened with paying even more in the Eurozone to prop up some its weaker members.
This has done little to inspire confidence in Merkel’s fledgling new government, which also faced a row over immigration earlier in the week, with Euro investors spooked by the possibility that the whole house of cards could collapse should factures within the government continue to grow.
EUR/ZAR Exchange Rate Forecast: Slowing Private Sector to Drag on Euro?
Looking ahead, the EUR/ZAR exchange rate may struggle at the end of this week’s session when the Eurozone publishes its latest PMI flash.
The preliminary reading is forecast to show that private sector growth continued to slow throughout June, with the composite index expected to slide from 54.1 to 53.9, which would be the slowest pace of expansion since late 2016.
This will also be the fifth consecutive month in which growth has slowed and is likely to see the Euro (EUR) tumble as it further dents the Eurozone’s second quarter growth prospects.
Meanwhile a lull in notable domestic data may hamper the South African Rand (ZAR) over the coming weeks, especially if trade tensions continue to pressure emerging market currencies such as ZAR.