Bias: Bearish-to-range-bound, as the EUR is currently below the 90-day average and in the lower half of the 3-month range.
Key drivers:
• Rate gap: The European Central Bank maintains a neutral stance while the South African Reserve Bank has shifted towards an accommodative policy with the recent interest rate cut, which supports the ZAR.
• Risk/commodities: Oil prices are currently above average, and this could lead to increased costs for the Eurozone, putting further pressure on the EUR against a stronger ZAR.
• One macro factor: The recent contraction in Germany's exports and slowing retail sales has weighed on EUR performance, limiting its ability to recover.
Range: EUR/ZAR is likely to drift within its recent range as macroeconomic pressures persist, lacking clear direction for a strong reversal.
What could change it:
• Upside risk: A surprise improvement in Eurozone economic data could boost EUR's value significantly.
• Downside risk: Continued geopolitical tensions or a sharp drop in oil prices could lead to further depreciation of the EUR against the ZAR.
