- Euro South African Rand Trends Around 14.08 – Lowest April levels
- French Election Jitters Put Pressure on Euro – Eurozone’s future may be at stake
- EUR Forecast: French Election Round One on Sunday – Who will advance to the second round?
- ZAR Forecast: SA Consumer Confidence Ahead – Political developments to remain in focus too
The Euro South African Rand exchange rate has fallen this week despite long-term concerns about the South African economy, as the first round of the French Presidential election is just around the corner.
EUR ZAR began this week trending at the level of 14.24. After briefly hitting a high of 14.34 on Wednesday the pair slumped and on Friday was trending near to April lows of 14.07.
Euro (EUR) Support Little Changes despite Strong Eurozone PMIs
Market anxiety ahead of this weekend’s French election first round has left the Euro weaker. The shared currency was unable to benefit from Friday’s impressive set of Eurozone PMIs due to French election jitters.
Germany’s preliminary April PMIs were mixed. While the key manufacturing PMI impressed, slipping from 58.3 to 58.2 rather than the projected 58, the other figures failed to meet expectations. Services slowed from 55.6 to 54.7, causing the composite print to slow from 57.1 to 56.3 and miss the forecast 56.8.
Despite this, all of the Eurozone’s overall preliminary April PMI figures beat expectations. Manufacturing surpassed the projected 56 by rising from 56.2 to 56.8. Services were predicted to remain at 56 but rose to 56.2.
Lastly, the overall composite PMI rose from 56.4 to 56.7, rather than slipping to 56.3 as forecast.
Analysts were optimistic about the data. IHS Markit’s chief economist, Chris Williamson, stated;
‘The Eurozone economy has enjoyed a strong start to the second quarter. The April flash PMI is running at a level consistent with 0.7% GDP growth, up from 0.6% in the first quarter. Such strong growth, if sustained, will inevitably lead to upward revisions to economists’ 2017 forecasts.’
The French election has of course remained the market focus however, keeping the Euro weak.
Investors generally hope a pro-EU French Presidential candidate, such as frontrunner Emmanuel Macron, will at least win the first round of the election.
If Macron makes it to the second round, bets that anti-EU candidates Marine Le Pen or Jean-Luc Melenchon could be beaten will strengthen. Until then, the election remains a highly uncertain four-horse race with many potential outcomes that could influence the Euro.
South African Rand (ZAR) Sturdies as New SA Finance Minister Offers Assurance
The highly uncertain political situation in South Africa continues to see developments this week, which have offered support to the recently volatile and embattled South African Rand (ZAR).
In the last month, the South African Rand plummeted when South African President Jacob Zuma unexpectedly reshuffled his cabinet and sacked respected finance minister, Pravin Gordhan.
Gordhan’s sacking led to credit rating downgrades from Standard & Poor, as well as Fitch. Both groups downgraded South Africa’s sovereign credit rating to ‘junk’.
However, recent weeks have seen the newly appointed SA finance minister, Malusi Gigaba, in damage control mode. Gigaba appears to have taken on much of Gordhan’s rhetoric and policies and has assured markets that he will work hard to keep South Africa from facing a third credit rating downgrade from Moody’s.
For now at least, markets are giving Gigaba the benefit of the doubt which has helped the undervalued Rand to recover in the last week or so.
Euro South African Rand Forecast: French Election in Focus
The results of Sunday’s French Presidential election first round will have massive implications for Euro exchange rates in the short to long-term. Both rounds of the election will doubtlessly be the biggest market events in recent months.
If pro-EU candidates Emmanuel Macron or Francois Fillon succeed in the first round and make it to the second round with strong polling figures, the Euro could recover slightly on hopes that they could defeat opponents who look to take France out of the Eurozone.
However, if anti-EU candidates Marine Le Pen or Jean-Luc Melenchon beat expectations with strong polling support, concerns will grow that a ‘Frexit’ will happen and the Euro will weaken.
A speculated Euro ‘nightmare scenario’ would see Le Pen and Melenchon both make it to the second round. This would cause the shared currency to plummet.
The South African rand is comparatively less likely to influence EUR ZAR movement next week. While Monday will see the publication of South Africa’s Q1 consumer confidence data, the impact of the French election results will be the focus for EUR ZAR traders.
At the time of writing this article, the Euro South African Rand exchange rate trended in the region of 14.08. The Rand to Euro exchange rate traded at around 0.0708.