Euro to South African Rand (EUR/ZAR) Exchange Rate Slips despite Risk-Off Movement
Despite numerous factors weighing on the South African Rand (ZAR) this week, the Euro to South African Rand (EUR/ZAR) exchange rate has been unable to hold the gains seen on Monday. Investors are hesitant to make moves on the Rand too much until the results South Africa’s 2019 election are known.
In what has been a similar movement to last week so far, EUR/ZAR has jumped and then shed those gains.
Last week, EUR/ZAR edged higher from the interbank level of R16.04 to around the level of R16.08, failing to hold last week’s monthly high of R16.28.
Demand for the Euro (EUR) is stronger this week thanks to more signs of strength than expected in Germany’s economy, but strength in rivals and the South African Rand’s resilience are currently keeping it from advancing.
Euro (EUR) Exchange Rates Sturdy as German Data Shows Signs of Improvement
While the Euro (EUR) has slipped versus the South African Rand (ZAR) in the last few sessions, the shared currency’s appeal remains fairly solid this week.
Rather than being weakened by any domestic news, the Euro’s strength is being limited more by the stronger appeal of its rivals, such as the US Dollar (USD), which it shares a negative correlation with.
There are also lingering concerns that the Eurozone economy is still in for months more slowdown and will fail to rebound in the second half of the year, but those concerns have lessened since last week.
This is because yesterday’s German industrial production report beat expectations, with activity coming in at a solid 0.5% rather than the predicted contraction of -0.5%.
Analysts welcomed the report, with some saying it pointed towards better-than-expected German economic growth at the beginning of 2019. Rosie Colthorpe from Oxford Economics said:
‘While sentiment in the German manufacturing sector has been pretty gloomy throughout 2019, the production data paints a less downbeat picture.’
South African Rand (ZAR) Exchange Rates Resilient as Election Continues
Many currencies correlated with risk and trade-sentiment, such as the South African Rand (ZAR), slumped today as US-China trade tensions appeared to worsen.
Despite investors avoiding trade-correlated currencies though, the South African Rand remained firm, even strengthening versus a relatively steady Euro (EUR).
This is because investors bought ZAR in anticipation of South Africa’s 2019 general election to end with a result that would strengthen national political stability.
Votes continue to be counted throughout today, with the ruling African National Congress (ANC) party looking likely to see a comfortable win.
According to Nema Ramkhelawan-Bhana, an analyst at RMB:
‘It’s too early to tell how the domestic market has interpreted the initial results,
The Rand’s apparent outperformance against a basket of EM currencies, despite concerns over the fluidity of US-Sino trade talks, could be reinforced if the consensus expectation for the ruling party plays out and the ANC secures 57 percent-58.5 percent of the national vote.’
Euro to South African Rand (EUR/ZAR) Exchange Rate Traders Anticipate Political News and German Data
For now, the African National Congress (ANC) leads in the votes counted so far, and analysts expect a comfortable win for the ruling party.
However, the count is not without uncertainty, as one of the opposition parties, the Democratic Alliance, has indicated it will call for an audit of the vote once it is over.
Overall though, analysts predict that if a solid win for the ANC is confirmed, the South African Rand (ZAR) could solidify this week’s gains, making it more difficult for EUR/ZAR to climb.
The Euro (EUR) could still see a late-week gain however, if tomorrow’s German trade balance data impresses investors.
With global trade uncertainty taking focus again amid US-China trade tensions, signs of strength in German trade would offer the Euro some fresh support.
As a result the Euro to South African Rand (EUR/ZAR) exchange rate could still see gains before markets close for the week.