BNY's Geoff Yu highlights that Euro area retail trade shows modest growth while Eurozone construction PMI signals a sharp contraction and rising cost pressures. German manufacturing orders and services turnover are improving, but France’s trade deficit is widening on energy imports. Yu warns European fiscal risks and local U.K. elections could test the bond rally and influence EUR/USD performance.

Mixed macro signals across Eurozone

"European fiscal risk to test the bond rally: The main political event of the day is local elections in the U.K. A loss of more than 2,000 council seats for the Labour Party is generally seen as a worse-than-expected result for the ruling party, and the market fears that whatever the ramifications for individuals, there will be a push for greater fiscal spending to help alleviate the cost of living crisis."

"Euro area retail trade edged down by 0.1% m/m in March, while EU retail sales increased by 0.3%, indicating mixed short-term momentum across the region. On a y/y basis, retail volumes rose by 1.2% in the euro area and 1.9% in the EU, pointing to modest underlying growth."

"Eurozone construction activity deteriorated further in April, with the construction PMI falling to 41.7 points from 44.6 in March, signaling the sharpest contraction since August 2024 and extending a prolonged period of decline."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)