The Euro South African Rand (EUR ZAR) exchange rate slipped today as the pairing ceded much of the gains made during last week’s session.
South African Rand (ZAR) Strengthens as Moody’s Leaves Rating Unchanged
The South African Rand began to recover at the start of the week, recouping much of the losses made last Tuesday following a parliamentary vote.
The Rand plummeted against the Euro last week following President Jacob Zuma’s narrow survival of a no-confidence vote amid repeated allegations of corruption.
Markets were dismayed by the vote as they feel that Zuma has a negative impact on the Rand, Analysts at ING said last week just before the vote;
‘The failure of the No Confidence motion (assuming no more such motions are forthcoming) would leave Zuma in office as President until May 2019, we suspect Zuma’s survival today will maintain a political risk premium in the ZAR. This was most manifest when Zuma fired his respected Finance Minister, Pravin Gordhan, in March, prompting ratings agency downgrades on governance concerns.’
However it appears that market sentiment has begun to tick higher again this week as Credit rating agency Moody’s declined to release a new rating review of South Africa on Friday as many observers had expected, with the agency arguing that there has not been significant reason to review its current status.
The agency last downgraded South Africa’s credit rating in June following, Zuma’s sudden removal of Pravin Gordhan from his position as Finance Minister.
Euro (EUR) Slips as Industrial Production Disappoints
The Euro put up little resistance against the Rand in today’s session as it was undermined by a sharp fall in the Eurozone’s factory output.
According to statistics agency Eurostat the Eurozone’s Industrial Production contracted by 0.6% in June, a significant slide from the previous month’s 1.2% growth and striking its lowest levels since December.
Today’s data follows equally underwhelming production data from Germany last week and has led to speculation that the Eurozone is beginning to slow.
However many analysts remain confident that the Eurozone’s growth will continue into the second half of the year and that June’s slowdown will ultimately prove to be temporary
ING Bank economist Bert Colijn said;
‘Due to strength in orders and businesses noting strong improvements in production, it seems that an improved trend for production is still in the cards. This would indicate that the surprising growth in the Eurozone could continue in the second half of the year.’
EUR ZAR Forecast: Germany to Show Healthy Growth in the Second Quarter?
Looking ahead the EUR ZAR exchange rate may rally from its lows on Tuesday following the release of Germany’s latest GDP estimate, with economists forecasting that Europe’s largest economy will have grown a healthy 0.7% in the second quarter.
Meanwhile expectations that South African retail sales will have contracted in June is likely to weigh on the Rand on Wednesday, with forecasts that sales will have slumped -0.3% after rising 0.9% in May.
Current Interbank Exchange Rates
At the time of writing the EUR ZAR exchange rate was trending around 15.6988 and the ZAR EUR exchange rate was trending around 0.0675.
