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Euro to South African Rand (EUR/ZAR) Exchange Rate Trends within Narrow Range after SARB Held Rates

Published: 21 May at 5 PM Tags: Euro Exchange Rate, Dollar Exchange Rate, Currency Exchange, Euro Crisis, Rand Exchange Rate, UK, Exchange Rates, Economy, Inflation,

The Euro to South African Rand (EUR/ZAR) exchange rate was trending within a tight range on Thursday afternoon.

Despite the fact that the Eurozone produced largely negative economic data, the common currency strengthened versus a handful of currencies. The appreciation can be linked to a fairly hawkish account of the European Central Bank’s (ECB) monetary policy decision.

German economic data produced poor results on Thursday, although it had minimal impact on demand for the single currency. The German Composite, Manufacturing and Services PMIs all came in below estimates, prompting speculation of a slowdown in Eurozone growth.

Oliver Kolodseike, Economist at Markit and author of the Flash Germany PMI, said; ‘While the survey data are consistent with further GDP growth heading into the middle of the year, it looks as if this rate of expansion of the German economy will remain sluggish in the months ahead. On a more positive note, employment growth picked up slightly in May, with the labour market so far avoiding any ill effects from weaker output growth.’

The Euro uptrend is mostly the result of a positive report from the ECB’s most recent monetary policy meeting. The report indicated that all of the policymakers were pleased with the progress seen within the initial few months of quantitative easing.
The South African Rand, meanwhile, edged higher versus many of its currency rivals in response to the South African Reserve Bank (SARB) holding the benchmark interest rate. Additional gains can be linked to a weaker US Dollar fuelling demand for emerging-market assets.

The benchmark interest rate was kept at 5.75% after a recent soft inflation report allowed the SARB room to breathe. ‘The MPC has decided to keep the repurchase rate unchanged at this meeting. Four members of the committee favoured an unchanged stance while two favoured a 25 basis point increase. The deteriorating inflation outlook suggests that this unchanged stance cannot be maintained indefinitely. The MPC will continue to closely monitor the evolution of inflation expectations and other factors that could undermine the longer term inflation outlook and stands ready to act when appropriate,’ South African Reserve Bank Governor Lesetja Kganyago said during his announcement.

After the Federal Open Market Committee (FOMC) published dovish minutes from the most recent interest rate decision meeting, the US Dollar slumped across the board. This prompted traders to seek high-yielding assets, and emerging-market currencies, such as the Rand, appreciated as a result.

The Euro to South African Rand (EUR/ZAR) exchange rate was trending within the region of 13.0400 – 13.2015 during Thursday’s European session.