GDP data are dreadful, and they are likely to be even worse (Daily analysis 30.04.2020)

30.04.2020 13:34|Bartosz Grejner

The economies of France and Spain contracted by more than 5% in the Q1 of the year, Italy by slightly less than 5%. The eurozone noted a record fall in GDP by 3.8%, although all these data may be misstated and are actually even worse. The number of unemployed people in Germany rose the strongest in April in at least three decades.

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

  • 1:45 p.m.: ECB statement.
  • 2:30 p.m.: ECB press conference.
  • 2:30 p.m.: Initial jobless claims in the USA for last week (estimates: 3.5 million).

Germany with the highest increase in unemployment in 30 years

On Thursday morning, a series of data from Europe was released. According to preliminary information from Eurostat, GDP in the eurozone contracted by 3.8% q/q in the Q1, as expected. However, the fall in GDP in the most affected by the virus economies turned out to be deeper than expected, and they published their preliminary data also today. The French and Spanish economies contracted by more than 5% between January and March, by 5.4% and 5.2% respectively, clearly more than expected by economists (4.0% and 4.3%).

The GDP of Italy has contracted by 4.7%, while a decline of around 5.4% was expected. However, publications from Italy, like those from other parts of Europe, may be incomplete due to the pandemic. The impact is most likely more significant than we see in the readings (some companies were simply closed and no readings were received). These data will most likely be much worse for the second quarter - not only in Italy, and a glimpse of this is already seen in the partial macro data for April.

The report on the German labour market published today by the Bundesbank shows that the number of unemployed people increased by 373k in April - the highest in the history of the survey (i.e. at least since March 1991). The unemployment rate (receiving claims) also increased to 5.8%, i.e. to the highest level in three years, as well as by 0.6 percentage points above expectations.

Today's macro data illustrate, as in previous days, how profound the impact of a pandemic on the economies in subsequent periods can be. The data for Q1 includes only one month, in some cases even less than a month, of actual closures of economies. The published data also illustrate another aspect of the pandemic: how difficult it is to estimate its impact on economies. And forecasts for subsequent periods will be subject to even greater uncertainty than for Q1.

Federal Reserve did not surprise

The market, as in the previous days, practically ignores the disastrous macroeconomic data and focuses on the recovery path to pre-pandemic levels. The equity market is particularly optimistic, pricing a very aggressive growth path, which is likely to be very hard to achieve. The reaction of the foreign exchange market (and bonds) is more limited.

The dollar depreciated somewhat after yesterday's statement and the Federal Reserve's press conference, although the Fed did not surprise the public. The main currency pair's exchange rate, i.e. the EUR/USD, remained slightly below 1.09, the upper limit for about two weeks.

All eyes on ECB

The main event of today, strongly awaited by the market, is a statement and press conference of the European Central Bank (ECB). Market expectations are quite mixed - from refraining from extending the asset purchase programme to increasing it and including junk bonds. The focus of investors on the ECB may now be slightly greater, as European leaders have failed to work out a joint, coordinated action to counteract the economic impact of the pandemic in recent weeks.

The zloty's quotations continue to move in a limited range. The globally weaker dollar caused the USD/PLN exchange rate to fall to about 4.17, which is slightly below yesterday's lows. The EUR/PLN exchange rate is still in the range 4.53-4.54.

At the time of the publication of the statement and the ECB press conference, we can expect increased volatility. The lack of additional actions taken by the Bank may potentially be negatively perceived by the market and may weaken the zloty somewhat.

Later in the day, data from the US labour market will also be published, which may increase the dollar fluctuations slightly.


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This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

See also:

29 Apr 2020 16:22

US GDP fails expectations, but hopes are rising for the coronavirus treatment (Afternoon analysis 29.04.2020)

29 Apr 2020 13:00

Spain with a sharp drop in retail sales (Daily analysis 29.04.2020)

28 Apr 2020 17:25

Virus deepens the US trade deficit (Afternoon analysis 28.04.2020)

28 Apr 2020 11:57

Franc at its lowest level in three weeks (Daily analysis 28.04.2020)

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