Uncertainty about Fed Interest Rate Hike Drags EUR/ZAR Exchange Rate Down
The Euro (EUR) has fallen by -0.7% against the South African Rand (ZAR) today, which has erased the week’s best exchange rate seen on Tuesday.
At present, the Euro is mainly being weakened by EUR trader uncertainty about this evening’s Federal Reserve interest rate decision.
The US central bank is expected to hike interest rates for the third time in 2018, which could rattle Euro traders and cause an additional decline in value.
A US rate hike will make banking in the Eurozone less appealing due to better rates elsewhere.
Additionally, the US Dollar could strengthen on news of a rate hike which will reduce demand for the Euro.
Eurozone news hasn’t done much to raise EUR trader confidence today, with France’s consumer confidence reading for September declining.
The measurement of French consumer sentiment has fallen to its lowest level since April 2016, with a shift from 96 points to 94.
South African Rand to Euro (ZAR/EUR) Exchange Rate Rises despite Risk of Fed Rate Hike
Like the Euro (EUR), the South African Rand (ZAR) stands to lose out when the Fed makes its interest rate decision this evening.
Despite the risk of a near-term crash, however, the Rand has most recently advanced against the Euro, US Dollar and Pound.
This surprise appreciation coincides with the US Dollar falling in value; the US currency has dropped because of Fed and trading uncertainties.
In the former case, USD traders are unsure of whether Fed policymakers will commit to another interest rate hike in November or December this year.
In the latter, the ongoing US-China trading conflict has been a limiting factor on US Dollar demand, which has added to current support for the South African Rand.
Euro to South African Rand Forecast: Will EUR/ZAR Exchange Rate Drop on Falling Eurozone Confidence?
As mentioned above, the US Federal Reserve interest rate decision is the next economic event to watch out for.
If Fed officials raise interest rates from 2% to 2.25% as predicted, the Euro and South African Rand could both fall in value.
The Euro (EUR) may make additional losses against the South African Rand (ZAR) on Thursday, when pessimistically-predicted Eurozone confidence data is due out.
Figures for September are expected to print negatively across the board, with economists estimating a drop in consumer and business confidence levels.
If confidence levels decline across the board then the Euro could fall further against the Rand; this is more likely if the figures fall by more than forecast.
Outside of this data, the Euro might also be affected by later comments from European Central Bank (ECB) policymakers.
ECB President Mario Draghi and Executive Peter Praet will be speaking during the afternoon and might inspire a EUR/ZAR rise if they back a 2019 interest rate hike.
The ECB is pencilled in to lift interest rates from 0% at some point next year – if it looks like an early rate hike is on the cards then the Euro could rally.
