Steady German Growth Fails to Shore up Euro South African Rand (EUR/ZAR) Exchange Rate
The Euro to South African Rand (EUR/ZAR) exchange rate came under renewed pressure ahead of the weekend even after confirmation of a solid second quarter German gross domestic product.
Investors failed to take any particular encouragement from the German growth data, even though quarterly growth remained robust at 0.5%.
Instead, focus fell on the less encouraging underlying details of the report, especially as exports failed to rebound as far as forecast on the quarter.
On the other hand, import volumes rose sharply on the quarter, with this imbalance highlighting a persistent vulnerability within the Eurozone’s powerhouse economy.
This left the EUR/ZAR exchange rate on a downtrend, in spite of the relatively positive tone of Thursday’s European Central Bank (ECB) meeting minutes.
Euro South African Rand (EUR/ZAR) Exchange Rate Slides as Risk Aversion Eases
A general recovery in market risk appetite further dented the Euro to South African Rand (EUR/ZAR) exchange rate on Friday morning.
Although trade talks between the US and China ended without any particular signs of progress demand for the South African Rand (ZAR) still picked up.
While US protectionism continues to cast a shadow over the outlook of the global economy this was not enough to prevent investors buying back into the Rand.
In large part this appeared to be driven by the relative weakness of ZAR exchange rates, which had also come under pressure as the Trump administration appeared prepared to weigh in on the issue of land expropriation.
Unless words turn into actual action, however, the ultimate impact of Trump’s comments is likely to remain rather short-lived in nature.
Solid Eurozone Inflation to Boost EUR/ZAR Exchange Rate Further
Fresh volatility is likely in store for the Euro to South African Rand (EUR/ZAR) exchange rate next week with the release of the latest Eurozone inflation data.
The Euro (EUR) looks vulnerable to any signs of easing in either the German or Eurozone consumer price index data.
If the headline Eurozone inflation rate fails to hold steady above the ECB’s 2% target rate this could weigh heavily on EUR exchange rates.
While the ECB minutes expressed greater confidence in the inflationary outlook any faltering in price pressures may discourage policymakers.
However, a fresh uptick in inflation may give the EUR/ZAR exchange rate a sharp boost higher, increasing the chances of the ECB pulling the trigger on interest rates sooner rather than later.
South African Rand (ZAR) Exchange Rates Remain Vulnerable to Market Jitters
Developments in South African politics and the wider global economy could offer further support to the Euro to South African Rand (EUR/ZAR) exchange rate over the coming week.
Any evidence that that South African economy is in a more robust state of health, though, may encourage fresh gains for the Rand.
A decline in July’s producer price index data would suggest that inflationary pressure within the domestic economy is easing, to the likely relief of the South African Reserve Bank (SARB).
However, if the South African trade balance deteriorates as forecast, falling into a state of deficit, this would give the Euro to South African Rand (EUR/ZAR) exchange rate a fresh leg up.