EUR/ZAR Exchange Rate Subdued as Eurozone Growth Downgraded and Ramaphosa Prepares to Address the Nation
The Euro to South African Rand (EUR/ZAR) exchange rate is trading in a narrow range today after the European Commission downgrade its latest growth forecasts.
At the time of writing EUR/ZAR exchange rate remains close to its opening levels this morning, leaving the pairing just shy of a one-week high.
South African Rand (ZAR) Holds Steady Ahead of Ramaphosa’s State of the Nation Address
Meanwhile, the South African Rand (ZAR) is struggling to find momentum this morning as markets brace for President Cyril Ramaphosa’s state of the nation address later this evening.
This will be Ramaphosa’s second address since becoming President and ZAR investors will be eager to learn more about his economic plans.
Of particular focus will be how Ramaphosa plans to tackle widespread unemployment in the country, after making it one of his top priorities in his party’s election manifesto, with the Rand potentially strengthening if he manages to win over ZAR investors.
Euro (EUR) Exchange Rates Muted as EU Slashes Growth Forecasts
The Euro (EUR) is rangebound against the South African Rand (ZAR) and many of its other currency peers this morning as the European Commission downgraded its growth forecasts for 2019.
In its latest forecasts the EC expects the Eurozone will expand by 1.3% this year, a sharp downgrade from its previous forecast of 1.9%.
Most worrying however is the Commission’s latest forecasts for Italy as it slashed its expectations from a modest 1.2% to a paltry 0.2% amidst concerns over the country’s new populist government.
The European Commission wrote:
‘While the initial [Italian] slowdown was largely due to less dynamic world trade, the recent slackening of economic activity is more attributable to sluggish domestic demand, particularly investment, as uncertainty related to the government’s policy stance and rising financing costs took its toll.’
This follows the release of Germany’s latest industrial figures earlier in the session which also dented the appeal of the Euro as it reinforced concerns the Eurozone’s largest economy may have slipped into a recession at the end of 2018.
According to data published by Destatis, German industrial production contracted a further 0.4% in December, the fourth straight month of contraction, and falling well short of expectations for a healthier 0.7% expansion.
More German gloom: Germany’s Industrial Output declines, feeding doubts over rebound. Production dropped 0.4% in December; median estimate 0.8% gain. https://t.co/ar5owq7Vd6 pic.twitter.com/8vlkYUNfqt
— Holger Zschaepitz (@Schuldensuehner) February 7, 2019
EUR/ZAR Exchange Rate Forecast: German GDP under the Spotlight
Looking ahead, the main catalyst for movement in the Euro South African Rand (EUR/ZAR) exchange rate in the short-term is likely to be the release of Germany’s latest GDP figures late next week.
This will provide EUR investors with concrete figures showing whether or not the Germany entered a technical recession at the end of 2018, with the Euro expected to nosedive if this proves to be true.
In the meantime the release of South Africa’s latest labour report could lend some support to the Rand next week if unemployment began to retreat again in the fourth quarter.