EUR/ZAR Exchange Rate Falls as Risk Sentiment Improves
The Euro to South African Rand fell today, with the pairing currently trading around R18.34.
The South African Rand benefited from the International Monetary Fund’s (IMF) bullish outlook for the global economy.
Covid-19 vaccine have helped improve the IMF’s previous outlook back in October.
However, the IMF’s Chief Economist, Gita Gopinath, warned:
‘Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens.’
‘There remains tremendous uncertainty and prospects vary greatly across countries.’
South Africa’s Covid-19 situation also appears to be worsening, with the new virus variant causing concern as the nation’s excess deaths soars.
Debbie Bradshaw, a researcher at the South African Medical Research Council, commented:
‘We’re rather surprised by the high numbers. The growth in excess deaths from natural causes in the provinces is very confluent with the unfolding of the second wave, so we think that a high proportion must be Covid-related deaths. We can’t give an exact figure but our guess is that’s it’s probably between 70% and 80%.’
Euro Struggles Despite ‘Considerably Brighter’ Outlook for German Economy
The Euro failed to rise against the South African Rand despite the Eurozone’s largest economy, Germany, reportedly having a ‘considerably brighter’ outlook.
Clemens Fuest, the President of the IFO, said:
‘Clarity on Brexit and the US presidency, a robust industrial economy and the start of global vaccinations have led to cautious optimism in the German export industry.’
The sentiment in Germany’s industrial sector has hit its highest since October, according to the IFO economic institute.
However, Christine Lagarde, the European Central Bank’s President, said that the Eurozone’s economic growth could be delayed.
As a result, EUR investors are remaining cautious as the Eurozone’s economy continues to struggle with the Covid-19 epidemic.
EUR/ZAR Outlook: German Consumer Confidence in Focus
Euro traders are awaiting tomorrow’s release of Germany’s Consumer Confidence Survey for February.
If the outlook for the Germany economy – the largest in the Eurozone – continues to deteriorate because of further lockdown fears, then the single currency will suffer.
Any further signs of a potential delay in Covid-19 vaccines reaching Europe, however, would also be EUR-negative.
Meanwhile, the South African Rand will remain sensitive to global risk sentiment.
If the outlook for the US economy continues to improve, then we will see demand for the risk-sensitive South African Rand increase.
