The Euro to South African Rand (EUR/ZAR) exchange rate experienced mixed trading on Wednesday as sentiment towards emerging market assets came under pressure ahead of the evenings US Federal Reserve interest rate decision. The single currency meanwhile, continued to be weakened by concerns over Greece.
The Euro to South African Rand (EUR/ZAR) exchange rate was trading in the range of 13.8909 to 14.0529
The Euro weakened after the Greek central bank warned for the first time that the nation could be forced out of both the Eurozone and European Union if the nation fails to reach a deal with its international creditors. Both sides have blamed the other for the stalemate in negotiations and neither appears willing to back down.
‘Failure to reach an agreement would mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the Euro area and, most likely from the European Union,’ said the Bank of Greece.
Eurozone inflation data came in at forecast levels, adding little in the way of support to the Euro. On a monthly basis, inflation rose by 0.2% whilst on an annual basis inflation rose by 0.9%.
South African Inflation Rises to 5-Month High
The Rand remained weaker against its major peers as domestic data was overshadowed by the evenings US Federal Reserve policy meeting. If the statement suggests that the Fed is still on track to raise interest rates in September the ‘Greenback’ will make strong gains whilst emerging market assets such as the Rand will decline.
Data released by Statistics South Africa showed that inflation in Africa’s most developed economy increased for a third consecutive month in May, rising to a five-month high of 4.6% on an annual basis. Economists had been forecasting for a rise to 4.5%. The inflation rate is now at its highest level since the 5.3% seen in December. On a monthly basis, prices rose by 0.3%, in line with forecasts.
A separate report also offered little support to the Rand as it showed that retail sales in South Africa increased by 0.2% on a monthly basis in April, an improvement on the preceding months -0.5% figure but well below economist expectations for a rise to 1.04%. On an annual basis, sales rose by 3.4%, beating forecasts for a rise of 1.8%.
