Tension among EUR Traders Leads to EUR/ZAR Exchange Rate Losses
The Euro (EUR) has fallen by -0.6% against the South African Rand (ZAR) today, ahead of a key meeting of European Central Bank (ECB) policymakers.
It should be noted that the Euro is trading positively against other peers, so this decline is partly down the Rand being the stronger currency of the pair.
Despite some economists downplaying today’s event, Euro traders are still keeping a close eye on the situation for any key statements from policymakers.
Among those remaining cautious has been A&G Banca Privada’s Diego Fernandez, who said:
‘[The] meeting should be just a formality.
‘[ECB President Mario] Draghi will probably repeat his messages on the bond-buying program and on rates and insist on the need for more fiscal steps. There is little room for surprises.’
Among other issues that policymakers could touch on is Italy’s budget situation.
The Italian government has submitted a budget to the European Commission (EC) that has subsequently been rejected and sent back for revision.
This risks frustrating Italy’s Eurosceptic government and might lead to greater problems if the revised budget is also given a thumbs down in 3 weeks’ time.
South African Rand to Euro (ZAR/EUR) Exchange Rate Rises despite Mixed Treasury Forecasts
The South African Rand (ZAR) has traded higher against the Euro (EUR) today, despite a mix of economic data not completely supporting the Rand.
The South African National Treasury has given a number of economic forecasts about 2019 and 2020, some being pessimistic and others being more positive.
In the worst-case scenarios, the Treasury predicts contracting GDP due to a currency crisis; slightly better is a sluggish pace of growth.
The best forecast, which appears to be bolstering ZAR demand today, is for a faster pace of GDP growth and a stronger Rand due to increased economic confidence.
Euro to Rand Exchange Rate Forecast: Are EUR/ZAR Gains ahead on ECB Meeting?
The Euro (EUR) could recover and rise sharply against the Rand (ZAR) in the near-future, when the European Central Bank (ECB) holds a monetary policy meeting.
ECB policymakers aren’t expected to adjust interest rates from 0%, but could still boost the EUR/ZAR exchange rate with their remarks.
In the ideal world, ECB President Mario Draghi will point towards the central bank raising interest rates in 2019, preferably sooner rather than later.
The ECB cut rates to 0% in 2016 and has left them unchanged ever since, so many Euro traders feel that a near-term rate hike is long overdue.
Mr Draghi’s press conference will be the main event, as the President has a history of causing EUR volatility with his remarks.
Beyond this afternoon’s data, the EUR/ZAR exchange rate could also be affected by Friday morning’s German GfK consumer confidence reading.
Covering expectations for November, this is predicted to show a slight drop in sentiment which could worsen EUR/ZAR trading.