Euro to South African Rand (EUR/CHF) Exchange Rate Forecast to Advance after South African Consumer Confidence Dives

The common currency strengthened versus the majority of its peers on Thursday irrespective of ongoing geopolitical turmoil in the Hellenic nation. The appreciation is the result of European Central Bank (ECB) developments rather than the worsening situation in Greece. The ECB announced that they would not remove the Emergency Liquidity Assistance (ELA) currently propping up Greek banks at this juncture. However, EB officials have already stated that there will be swift review of the viability of continuing ELA depending on the result from the austerity referendum due to take place on Sunday. A ‘no’ vote will cause the ECB to seriously consider ending ELA, a programme already controversial given that the fund was designed to aid solvent banks.

In addition to the continuation of ELA supporting a single currency uptrend, ECB minutes showed they are increasing bond purchases to include around 13 more government-linked agencies to its quantitative easing buying list. This gives the central bank more scope to deal with any crises and diminish the fallout or contagion from a Greek exit from the Eurozone.

The Euro to South African Rand (EUR/CHF) exchange rate is currently trending in the region of 13.5977.

The South African Rand, meanwhile, softened versus its major peers despite a weaker US Dollar. The depreciation can be linked to a disappointing domestic data result. Second-quarter Consumer Confidence was expected to rise from -4 to -0.75 but the actual result dived to -15. The sharp drop in confidence has been linked to continued difficulties with South Africa’s leading energy provider, Eskom, as the economy struggles against load-shedding and rolling black-outs. ‘A confluence of adverse economic developments is expected to put renewed downward pressure on the spending power of households from the second half of 2015,’ Sizwe Nxedlana, chief economist of FNB, said in the statement.

‘South Africa is currently experiencing the worst drought since 1992 -- putting significant upward pressure on domestic grain prices -- while electricity and fuel prices are set to rise further,’ Nxedlana said. ‘The odds of interest-rate hikes during the second half of 2015 have increased.’

Looking ahead, domestic data is unlikely to have a significant impact on the shared currency given that geopolitics is dominating trader focus. However, Friday’s Eurozone Retail Sales will be of interest to those invested in the single currency. In terms of South African data, the KAGISO Manufacturing PMI will be of interest although it has been delayed for several days so there is no guarantee of its publication. US Dollar movement and market sentiment is most likely to drive South African Rand movement.

The Euro to South African Rand (EUR/ZAR) exchange rate was trending within the range of 13.5110 – 13.6800.