Euro to South African Rand Exchange Rate Continues to Benefit from Risk-Aversion
Despite this week’s underwhelming Eurozone data, the Euro to South African Rand (EUR/ZAR) exchange rate has seen strong gains so far. This has been due to market risk-aversion, causing investors to sell risk-correlated currencies like the South African Rand (ZAR).
Last week’s movement was more mixed, but EUR/ZAR ultimately did advance on risk-aversion weakening the Rand.
This week’s EUR/ZAR gains have been much more significant by comparison and the pair has regained most of the losses seen since the beginning of the month.
Essentially, this week’s impressive EUR/ZAR gains have been more due to broad weakness in a volatile South African Rand than any strength in the Euro, which remains relatively unappealing overall.
Euro (EUR) Exchange Rate Strength Remains Limited on Eurozone Economic Jitters
Continuing signs of weakness in the growth of major Eurozone economies has left the Euro (EUR) broadly unappealing this week.
Last week’s Eurozone PMI projections for April saw manufacturing fall short of expectations in most major prints, and this week’s Eurozone confidence figures have also been worse than expected.
Investors have become more concerned about the divergence between the Eurozone and US economies, due to an unexpected fall in German business confidence reported by Ifo yesterday.
It left analysts even more concerned about the European Central Bank’s (ECB) monetary policy outlook, and caused investors to sell the Euro.
South African Rand (ZAR) Exchange Rates Continue to Fall on Risk-Aversion
The South African Rand (ZAR) is strongly correlated with forex market sentiment over risk and emerging markets, and as a result has seen significant losses this week.
Due to a number of factors, investors have been seeking out safe haven currencies, like the US Dollar (USD).
As the US stamps down of waivers on trade sanctions, notably for Iranian oil, with major nations like India and China, global market trade jitters have worsened this week.
Expectations for US economic resilience has also bolstered US Dollar demand and knocked risk-correlated currencies like the Rand much lower.
On top of the global movement away from assets correlated to risk, the South African Rand was also weaker due to some disappointing consumer confidence data published yesterday.
As the figure slumped from 7 to just 2, Maudi Lentsoane, Portfolio Manager at Lehumo Investments commented:
‘The consumer confidence number was very disappointing. Consumers are not confident, they don’t have money, the cost of living is rising. That had a negative impact on sentiment towards the currency,’
Euro to South African Rand (EUR/ZAR) Exchange Rate Traders Await Further Eurozone Data
The Euro to South African Rand (EUR/ZAR) has seen significant gains so far this week, and unless the South African Rand (ZAR) benefits from a late-week surge in risk-sentiment the pair is on track to sustain most of those gains.
Friday will see the publication of France’s April consumer confidence figure, but even if it disappoints investors the Euro (EUR) is unlikely to fall versus the Rand unless there is some kind of Rand rebound.
Instead, EUR/ZAR could actually see a stronger jump in demand if Friday’s French data impresses investors.
With EUR/ZAR on track to end this week higher though, investors are looking ahead to next week’s key data. Eurozone confidence data will come in on Monday, followed by a slew of influential data including German inflation and Eurozone growth on Tuesday.
The South African Rand, on the other hand, will continue to react to shifts in global market risk sentiment and the strength of the US Dollar (USD).
If global trade tensions or growth slowdown concerns diminish, investors may be more willing to buy risk-correlated assets again and the Euro to South African Rand (EUR/ZAR) exchange rate could tumble.