Euro to South African Rand New 2-Month-Best despite Poor Eurozone Data
Poor Eurozone data has limited the Euro to South African Rand (EUR/ZAR) exchange rate’s advances, but the pair has still made impressive gains this week thanks to a sharp selloff in the South African Rand (ZAR) in recent sessions.
Since opening this week at the interbank level of 16.20, EUR/ZAR spent most of the week trending modestly before surging on Wednesday.
Yesterday, EUR/ZAR briefly touched on a high of 16.95 – which was the pair’s best level since the end of August. At the time of writing on Friday, EUR/ZAR is trending a little lower, near the interbank level of 16.85.
The South African Rand’s movement cooled today, following major losses in recent sessions on the back of South African economic and credit rating fears.
Euro (EUR) Exchange Rates Lack Support to Sustain Best Levels
The Euro (EUR) has been able to sustain significant gains against a broadly weak South African Rand (ZAR) this week, but the shared currency’s gains have been limited by lasting Eurozone economic concerns.
The Euro has seen modest support in recent sessions by some decent Eurozone data, such as news that Eurozone growth is projected to have been better than expected in Q3. The Euro has also been boosted by weakness in its rival, the US Dollar (USD).
However, other factors are weighing on the Euro a little more heavily.
Yesterday’s Eurozone unemployment rate unexpectedly worsened to 7.5%, and Germany’s September retail sales worsened concerns that Germany’s economy could be suffering through a recession.
With most of the Euro’s gains due to weakness in rivals, it has been unable to hold its best levels.
South African Rand (ZAR) Exchange Rates Struggle for Footing after Wednesday Plummet
The South African Rand (ZAR) has seen a highly bearish week, as the latest South African news has left investors highly anxious about the health of the nation’s economy.
South Africa’s latest budget news and speech from Finance Minister Tito Mboweni painted a dire picture for South Africa’s outlook.
The budget revealed that the Eskom energy crisis would cost the nation 138billion Rand. On top of this, Mboweni slashed South Africa’s growth forecasts and said that higher debt is to be expected.
Following the highly disappointing budget news and South Africa’s concerning economic outlook, markets now widely expect that Moody’s will cut South Africa’s credit rating to negative.
Moody’s was the only major credit ratings agency to still give South Africa an investment grade, but these developments have caused bets of a credit rating cut to surge. According to Warrick Butler, Chief Trader at Standard Bank:
‘I will bet my last dollar that Moody’s will now move the country to negative watch. Something that before yesterday’s MTBPS (budget) was only a 40% probability has now become an almost guaranteed outcome.’
Euro to South African Rand (EUR/ZAR) Exchange Rate Investors Await Moody’s Decision
While Moody’s is now widely expected to cut South Africa’s credit rating to negative, the South African Rand (ZAR) could still see fresh losses in response to the cut.
On the other hand, if Moody’s surprises markets and leaves South Africa’s rating alone, the South African Rand would see a significant surge as it recovers some of this past week’s losses.
The Moody’s decision is expected sometime today, and could cause late-week Euro to South African Rand (EUR/ZAR) movement. The Euro (EUR) is likely to be more driven by movement in rivals like the US Dollar (USD).
Looking ahead to next week, there will be plenty of Eurozone data to influence Euro movement.
Eurozone manufacturing PMI data, especially Germany’s print, could give investors a better idea of the health of the Eurozone’s economy on Monday.
Services PMI data, as well as German factory and production data, could also cause some Euro to South African Rand (EUR/ZAR) exchange rate movement next week.