The current market bias for EUR/ZAR is bearish. Key drivers for this trend include the interest rate differential, with the European Central Bank maintaining rates while the South African Reserve Bank eased rates recently. This could lead to decreased demand for the euro. Additionally, the geopolitical tensions from the ongoing war in Ukraine continue to create uncertainty within the Eurozone economy, affecting the euro's strength. In South Africa, improved economic forecasts for 2026, along with a new inflation target, could provide support for the rand.
In the near term, EUR/ZAR is likely to trade within a gradually declining range as it remains 1.6% below its 3-month average. Upside risks include any unexpected positive economic data from the Eurozone, while downside risks could arise from further rate cuts in South Africa or escalation of geopolitical tensions impacting investor sentiment towards the euro.
