EUR/ZAR Outlook:
The EUR/ZAR exchange rate is likely to decrease as it is currently below the recent average and near recent lows. Key concerns regarding weak economic indicators may continue to pressure the euro against the rand.
Key drivers:
• Rate gap: The European Central Bank has kept interest rates steady, while the South African Reserve Bank recently lowered its repo rate, creating a widening spread.
• Risk/commodities: Higher gold prices are benefiting the South African rand, enhancing export earnings and attracting investment, which provides underlying support for the currency.
• One macro factor: Political instability in South Africa, particularly within the Government of National Unity, is eroding investor confidence and contributing to rand volatility.
Range:
Expect the EUR/ZAR to remain stable, with slight movements within the recent 3-month range.
What could change it:
• Upside risk: A significant recovery in Eurozone economic data could strengthen the euro.
• Downside risk: Continued political instability in South Africa may further weaken the rand.
