Euro South African Rand (EUR/ZAR) Exchange Rate Leaps as SA Pushes Ahead with Land Expropriation Amendment

Euro South African Rand (EUR/ZAR) Exchange Rate Surges after Land Grab Announcement

News that South Africa will push ahead with plans to put forward an amendment to allow the expropriation of land from farmers without compensation prompted the Euro to South African Rand (EUR/ZAR) exchange rate to surge higher.

The move unsettled investors, raising concerns of fresh disruption within the South African economy.

In the wake of President Cyril Ramaphosa’s announcement the South African Rand (ZAR) slumped sharply across the board, falling out of favour on the prospect of further domestic unrest.

Worries over the prospect of trade tensions between the US and China continuing to escalate also put pressure on ZAR exchange rates, with demand for risk-sensitive currencies easing.

Rising Eurozone Producer Prices Fail to Boost Euro (EUR) Exchange Rates

While the Eurozone producer price index picked up in June, rising 3.6% on the year, this offered limited support to the Euro to South African Rand (EUR/ZAR) exchange rate.

Even though this suggests that inflationary pressures are mounting within the Eurozone the mood towards the Euro (EUR) remained largely muted on Thursday morning.

After signs of weakness seen in the latest Eurozone gross domestic product and manufacturing PMI data investors have seen less reason to favour the Euro over its rivals.

Rising inflation is unlikely to encourage the European Central Bank (ECB) to adopt a more hawkish policy outlook in the near term, given evidence of underlying economic weakness.

However, the EUR/ZAR exchange rate remained on a bullish trend thanks to the significant softening of the South African Rand.

Euro South African Rand (EUR/ZAR) Exchange Rate May Lose Ground on Steady SA Data

Friday’s South African Standard Bank PMI is unlikely to put any particular pressure on the Euro to South African Rand (EUR/ZAR) exchange rate.

As the index showed limited expansion in June investors are not expecting to see any real improvement in the measure this month.

However, if the South African economy demonstrates signs of greater strength this could help to limit the losses of the South African Rand in the near term.

While the issue of land reform is likely to keep ZAR exchange rates on edge for some time to come investors may still be encouraged to buy back into the Rand after its recent losses.

Any deterioration in global market sentiment could leave the South African Rand vulnerable to further selling, though.

Stronger Eurozone Retail Sales to Support EUR/ZAR Exchange Rate

As forecasts point towards a rebound in monthly Eurozone retail sales in June the Euro to South African Rand (EUR/ZAR) exchange rate could find further support ahead of the weekend.

Investors expect to see a 0.4% uptick in sales on the month, following on from May’s stagnant figure.

This would signal a greater level of resilience and consumer confidence within the Eurozone economy, bolstering the appeal of the Euro.

On the other hand, if the finalised raft of Eurozone services PMIs show any downward revision this could weigh heavily on the single currency.

As long as investors see reason to doubt the economic outlook of the Eurozone the Euro to South African Rand (EUR/ZAR) exchange rate may struggle to hold onto its recent gains for long.

Hannah Wilson

Contact Hannah Wilson