Markets are on edge ahead of the expected announcement of mutual tariffs this Wednesday. The U.S. dollar stands at a crossroads—on one hand, it could gain support from higher tariffs, while on the other, the economic damage caused by President Trump’s chaotic actions and his disregard for their economic consequences is becoming increasingly evident. Inflationary pressure in the U.S. is rising, while consumer activity is weakening—an especially difficult situation for the Federal Reserve. At the same time, the outlook for the Polish złoty is clouded by a number of negative factors, and we wouldn’t be surprised if the EUR/PLN pair moves upward.
Key Takeaways:
- The PLN remains resilient, but risks are becoming more pronounced.
- Currency markets are stabilizing ahead of the tariff announcement.
- 25% tariffs on vehicles imported into the U.S. have been announced.
- The U.S. outlook is uncertain due to trade tensions.
- Eurozone PMI is near stagnation.
- Solid economic data is supporting the British pound.
Last week, which was relatively quiet in terms of economic and political news, saw currencies trading within narrow ranges as markets awaited the next round of tariff announcements scheduled for Wednesday, April 2. These will include a 25% tariff on imported vehicles. The consensus is that this will raise the average U.S. tariff rate significantly above 10%, compared to just 2.5% before Trump took office.
The most important releases this week include preliminary Eurozone PMI figures for March (Tuesday, April 1) and a series of U.S. labor market data, beginning with the JOLTS report on Wednesday (April 2) and concluding with the Non-Farm Payrolls (NFP) report on Friday (April 4).
PLN – Polish Złoty
Last week, the złoty was the second-best performing emerging market currency after the Indian rupee, posting modest gains against the euro. Its resilience is impressive and may partly be due to relatively favorable sentiment toward Europe—other high-beta European currencies also fared well. Surprisingly, the European (including Polish) stock markets are serving as a safe haven for some investors, especially as previously outperforming indices—particularly American ones—are now facing significant pressure.
However, tariffs also pose a threat to the Polish economy. A combination of trade tariffs, uncertainty, weak economic activity data, and upbeat inflation readings is negative for the złoty. We wouldn’t be surprised to see the EUR/PLN move higher, especially if tariffs on the EU are substantial and market sentiment deteriorates further.
Given the global focus, the upcoming National Bank of Poland (NBP) meeting may be overlooked. Nevertheless, investors will watch for any signs that the Monetary Policy Council (RPP) is softening its hawkish rhetoric and laying the groundwork for potential rate cuts.
EUR – Euro
March PMI figures for the eurozone do not reflect the optimism that spread across European financial markets after Germany announced massive fiscal stimulus. The composite PMI barely changed and still indicates near-stagnant activity.
Tuesday’s preliminary inflation reading may offer the European Central Bank better news—data from France and Spain surprised to the downside. However, attention this week will likely focus on the tariff announcement. Given the eurozone’s significant trade surplus with the U.S., it’s hard to imagine the euro strengthening under these conditions.
USD – U.S. Dollar
There is mounting evidence that the chaos triggered by Trump is undermining consumer confidence, expectations, and spending, although the picture remains mixed. In February, consumer spending once again fell short of consensus expectations, while the Fed’s preferred measure of inflation (PCE) showed another monthly increase in the core index.
At the same time, March’s services PMI surprised to the upside, boosting the overall composite index. This week, in addition to the tariff announcement (Wednesday, April 2), key U.S. labor market data will come into play—including the JOLTS report (Wednesday), initial jobless claims (Thursday, April 3), and most importantly, the March NFP report (Friday, April 4). These will help determine whether declining consumer spending is starting to influence companies’ hiring decisions.
GBP – British Pound
The UK economy is benefiting from strengthening demand and relatively low exposure to Trump’s tariffs, as the country primarily exports services and maintains a significant trade deficit with the U.S. March’s PMI readings improved significantly and now point to stable growth, led by the services sector.
February retail sales also exceeded expectations. This helped distract from the Office for Budget Responsibility (OBR)’s recent decision to cut its 2025 GDP forecast in half, down to 1%. Households also welcomed a sharp drop in inflation, although persistently high service inflation of 5% suggests it may still be too soon for the Bank of England to ease monetary policy. A combination of stable growth, tariff resilience, and closer ties to the EU continues to support the pound.
Authors: Enrique Díaz-Alvarez, Matthew Ryan, Roman Ziruk, Michał Jóźwiak – Ebury Analysts
