EUR/ZAR Exchange Rate Rises, Global Market Uncertainty Weakens Rand
The Euro South African Rand (EUR/ZAR) exchange rate soared by 1.3% today. The risk-sensitive South African currency is suffering from fears of economic fallout over the global coronavirus crisis. The pairing is currently fluctuating around R18.413.
ZAR traders are becoming increasingly concerned over South Africa’s economy after Health Minister Zwelini Mkhize announced that the nation’s cases of coronavirus had risen from 23 to 85.
With South Africa’s economy mostly industrialised and already in recession territory, the global Covid-19 crisis looks set to make matters worst by hitting the tourist industry and other major commodity exports to its closet trading partner China.
In South African economic news, today saw the release of February’s Consumer Price Index which beat forecasts and rose from 0.3% to 15-month high of 1%.
However, this is not expected to deter South Africa’s Reserve Bank (SARB) from cutting its interest rates on Thursday. The SARB is forecast to cut its interest rates from 6.25% to 5.75% to aid the economy through the Covid-19 crisis.
Euro (EUR) Exchange Rate Improves as EU Closes its Borders
The Euro (EUR) steadied against many of its peers and gained on the risk-averse South African Rand (ZAR) as the European Union closes its borders to halt the spread of coronavirus.
The EUR/ZAR exchange rate’s improvement owes itself to investors seeking out safe-haven currencies as global market uncertainty escalates.
Today saw the release of February’s final Eurozone Consumer Price Index report, which confirmed consensus and rose by 0.2 on the month, while the core year-on-year figure rose by 1.2%. This offered little support for the single currency as it remains beneath the European Central Bank’s (ECB) target of 2%.
Carsten Brzeski, Chief Economist for the Eurozone and Head of Macroeconomics at ING Bank, was downbeat about the Eurozone’s economy, saying:
‘In our view, the German economy is likely to experience a recession in the first half of the year, in terms of the plain GDP data probably getting close to numbers seen during the financial crisis.’
With the European Union (EU) under lockdown from most outsiders the bloc’s economic uncertainty is set to continue. As a result, we could see the EUR begin to sink on growing fears of a recession for the world’s third biggest economy.
EUR/ZAR Forecast: South African Rand to Weaken on SARB Interest Rate Cut
The South African Rand (ZAR) looks set to extend its losses this week with the South African Reserve Bank expected to slash its interest rates on Thursday. With rising economic uncertainty over Covid-19, the risk-sensitive ZAR will also continue to remain under pressure.
The EUR/ZAR exchange rate will likely maintain some of its gains as market volatility continues to hold back emerging market currencies like the South African Rand. However, any signs of a Eurozone recession in the near-term would considerably weaken the single currency.
