Eurozone's condition is deteriorating (Daily analysis 05.04.2018)

The final PMI indexes readings, weak order data from Germany and lower than expected retail sales from the eurozone increased the risks for the single currency area. The zloty remained relatively stable. The EUR/PLN pair still between 4.20-4.21.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

• A lack of macro data may noticeably impact the analyzed currency pairs.

Attempts to extinguish fire

The sentiment before yesterday's session in the United States was quite negative. Fears of a real customs war have caused significant depreciation of market indexes. Everything changed after an interview with Larry Kudlow, the new head of economic advisors in President Trump's office.

Kudlow's statements for the Fox Business (just after the session started) and Fox News (late afternoon) gave the impression that the fears of a trade war were exaggerated. Customs duties will not enter into force for at least a few months, and submitting a list of them is a negotiating strategy. Moreover, it appears that the option of 50 billion is the maximum amount and that it may decrease rather than increase.

Looking at the matter through less coloured glasses, the issue emerges if the statements for Fox News actually present the White House's position or whether they were just a fire extinguisher related to a very negative market reaction. However, for the time being, investors clearly believe in the mild scenario presented yesterday. Until it is seriously disrupted, it is likely to be present in the market.

Negative information from the eurozone

More and more signals indicate a slowdown in the economic growth of the eurozone. In the morning, German Destatis published data on orders in German industry. In February, they reached 10-month lows and orders increased by only 3.5% year-on-year instead of 6.5%.

Few positive messages were drawn from the final PMI indices. This confirmed the IHS preliminary readings before Easter. In addition, in Ireland, for example, the services index has fallen to its lowest levels in almost five years.

Retail sales in the eurozone also failed to meet expectations. In February, the monthly increase amounted to 0.1% month-on-month after a decrease both in December and January. For the third consecutive month, a decrease was recorded, e.g. in the clothing and footwear category. The year-on-year data still shows an increase (1.8%) but was expected to be 2.2%.

All these readings may, of course, have been disturbed to some extent by one-off factors (e.g. the weather in Ireland), but more and more publications in the eurozone have recently been suggesting a slowdown in GDP growth in subsequent quarters.

Calm situation on the zloty

The Polish currency reacts very calmly to both negative and positive reports on the trade conflict between the United States and China. The EUR/PLN remains in the range of 4.20-4.21. This should not change in the following hours either.

Tomorrow, however, data from the US labour market will be published. The customs discussion should calm down a little and Friday's readings from the Labor Department can send out signals for currencies or bonds.