The strongest drop in exports in history (Daily analysis 8.05.2020)

08.05.2020 13:40|Bartosz Grejner

Further data show that March in Germany was economically much worse than previously expected. Tourism in Croatia is fading away: the drop in the number of visitors in March by over 75% compared to last year. The dollar and the zloty are stable before the data from the USA, but fluctuations may increase significantly.

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

  • 2:30 p.m.: Change in employment in the non-farm sector in the USA in April (estimates: decrease by 22 million).
  • 2:30 p.m.: Unemployment rate in the USA in April (estimates: 16%).

Croatia: a quarter of tourism left

Even before the session started on the European markets, data on the trade exchange in Germany in March were known. According to Destatis, exports decreased by 11.8% m/m, compared to an expected 5.0% decrease. This is the biggest decrease in the history of the survey since August 1990. The decrease in imports was already slightly lower - imports fell by 5.1%. However, these data illustrate how much the German economy stopped in March, and in this respect, April will be even worse.

Most of the incoming macro-economic data highlight a more difficult situation than the consensus of the economists. This means that the recovery path to the pre-pandemic economies may be longer and slightly harder. The path will most likely also be very different for individual economies. Countries that depend on sectors that may have a slower recovery may suffer slightly more.

One such example is Croatia, whose economy is heavily dependent on tourism. Data published today by the Croatian Bureau of Statistics indicate that the number of tourists visiting the country dropped by 76.8% in March compared to the same period last year. And the cross-border movement of people and tourism are not likely to recover quickly, at least until there is an effective vaccine against the virus.

Mild tone on US-China relations

The market, as in previous weeks, does not seem to care about disastrous data. Instead, it focuses on the potential revival and increases in economic activity accompanying it. The issue of tariffs and the US trade agreement with China also came back last week. The tightening of rhetoric by President Donald Trump has somewhat strengthened the dollar and increased pressure on emerging countries' currencies (although these were mostly limited changes). Today, these market concerns have been somewhat mitigated.

On Friday, White House representatives (Robert Lighthizer and Steve Mnuchin) held a telephone conversation with China's Deputy Prime Minister, Liu He. A statement from the Chinese Ministry of Trade states that both sides agreed to create favourable conditions for the implementation of the mutual trade agreement and cooperation in the field of economy and public health, and they also want to maintain communication between the two sides.

In the context of the trade agreement with China, it should be remembered that Donald Trump did not once fully comply with what was communicated by his representatives. It is also part of the presidential campaign (elections in November), and the US President wants to be seen as a winner in this trade fight. With the gradual lifting of restrictions in connection with the pandemic, the intensification of the presidential campaign and negotiations with China may start to affect the sentiment on the market (positive for the dollar, negative for the euro and currencies of emerging countries, including the zloty).

Waiting for the worst labour market report

Another reason why the White House may have wanted to distract attention away from the domestic market is the incoming disastrous macroeconomic data. Today we will probably know the most important publication of them: labour market data for April. This will be perhaps the worst labour market report in the history of the USA, which expects a 22 million drop in employment and 16% unemployment.

As the time of publication approaches, foreign exchange market quotations remain stable and within a very limited fluctuation range. The main currency pair's exchange rate, the EUR/USD, moved around yesterday's closing level at midday, i.e. around 1.0840.

The stable dollar in the morning also supported small fluctuations of the zloty. The USD/PLN quotations continue to fluctuate around 4.20 and the EUR/PLN pair around 4.55-4.56. Later in the day, after the publication of the report on the US labour market, we can expect an increased fluctuation level, but the final impact of this publication on the market can only be known next week. If the data are much worse than expected, the dollar may weaken slightly, as may general market sentiment, and potentially the zloty.


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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:

7 May 2020 16:59

Over 33 million initial jobless claims in the USA (Afternoon analysis 7.05.2020)

7 May 2020 13:34

Drops in the activity greater than expected (Daily analysis 7.05.2020)

6 May 2020 17:42

A 20-million drop in employment in the US (Afternoon analysis 6.05.2020)

6 May 2020 12:28

Eurozone at risk (Daily analysis 6.05.2020)

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