Euro South African Rand (EUR/ZAR) Exchange Rate Weighed Down in Spite of Global Trade Tensions
An unexpectedly strong rebound in South African mining and manufacturing production on the month left the Euro to South African Rand (EUR/ZAR) exchange rate on a weaker footing.
Particularly encouraging was the 2.3% increase in manufacturing production on the year in May, which suggests that the domestic economy is recovering steam.
Market traders remain hopeful that the South African economy will demonstrate greater resilience over the coming months, lending support to the South African Rand (ZAR).
ZAR exchange rates also benefitted from a general easing in market risk aversion, in spite of heightened trade tensions between the US and China.
With investors still waiting to see whether the conflict with escalate further the South African Rand was able to recover some of its recent losses.
Worries over Eurozone Growth Outlook Limits EUR/ZAR Exchange Rate Upside
Although the latest German wholesale price index data proved stronger than forecast this failed to shore up the Euro to South African Rand (EUR/ZAR) exchange rate ahead of the weekend.
Investors were a little disappointed to find that price pressures had eased on the month, even as the yearly figure improved.
This left the Euro (EUR) under pressure as markets continued to speculate over the likely timing of the European Central Bank’s (ECB) first interest rate hike in years.
As the European Commission lowered its 2018 Eurozone growth forecast on Thursday this encouraged investors to sell out of the single currency.
Unless the Eurozone economy shows signs of recovering its lost momentum the appeal of the Euro is likely to remain limited.
Rising South African Inflation Forecast to Boost EUR/ZAR Exchange Rate
The Euro to South African Rand (EUR/ZAR) exchange rate could find a rallying point next week on the back of June’s South African inflation data.
As forecasts point towards another uptick in inflationary pressure this could put the South African Rand under renewed pressure.
If price pressures continue to mount this could provoke the South African Reserve Bank (SARB) into taking further policy action.
The threat of another interest rate cut may drag ZAR exchange rates lower on Tuesday, even though markets expect the SARB to take no action at its July meeting.
Either way, the EUR/ZAR exchange rate is likely to gain support ahead of the SARB policy meeting.
Euro South African Rand (EUR/ZAR) Likely to Shrug Off Weaker Eurozone Inflation
Reaction to the finalised Eurozone consumer price index may prove more limited, meanwhile, prompting little in the way of Euro to South African Rand (EUR/ZAR) exchange rate movement.
The final reading is expected to confirm that inflationary pressure eased in June, dampening the prospect of a more hawkish ECB outlook.
Even so, in the absence of any revision to the data the impact on EUR exchange rates is likely to be minimal.
A widening of the Eurozone trade surplus, on the other hand, could set the Euro to South African Rand (EUR/ZAR) exchange rate on a fresh uptrend.