Currencies: Polish zloty strengthened below EUR/PLN 4.00

Czech Republic

The Polish zloty kept its recent gains and stayed below 4.00 EUR/PLN on Tuesday. It was partly thanks to improving global sentiment, but also due to growing belief in healthy domestic fundamentals. Poland’s recent plan to cap budget spending and speed-up sale of state assets only helped to build the image of economy well sustaining the global headwinds.

From a technical point of view, it seems to be clear that the Polish currency has the space for further gains now. We see next strong support at 3.862 EUR/PLN (62.8% Fibonacci resistance). The domestic scene is empty and we are more and more convinced that the zloty is currently capable to withstand even temporary spikes in global risk aversion.


Bonds 2Ychange
Czech Rep.1.79-0.01
Hungary 3Y7.19-0.05

Bonds 10Ychange
Czech Rep.4.480.01


The Hungarian forint had a quiet day on Tuesday and the pair hovered at the 270.00 level throughout the day. The lack of domestic news together with rebuilding confidence in risky assets after a two-week long pause could make the forint’s relatively high interest rate attractive for the short-term, but we remain cautious about the long-term outlook.

The Hungarian bond market hardly moved yesterday. The 3-months T-Bill auction went on well with a bid/cover ratio of over 3.0, while the cut-off rate declined to 5.67% implying at least another 25bps cut or maybe two from the current 6.00% base rate level.

Czech Republic

The Czech koruna moved sideways in technical trading yesterday. The koruna watched the firming zloty, but since the EUR/PLN brake below the 4.0 level the EUR/CZK pair bounced back above the 26.0 figure. While zloty’s developments will be still in focus, the market might start to look forward to tomorrow’s central bank meeting, while the important US statistics could have an impact on CE currencies too. All in all, the zloty will be a key factor for the koruna in upcoming hours.

The Czech yield curve flattened as short yields added around 7 bps, while the long end of the curve dipped slightly. We do not overestimate this price action, since we see it as a correction of Monday’s trading. Interestingly, the MinFin said that it wanted to sell €1-2B worth of government eurobonds this year. This is much less that the fullyear issuance strategy called – the Strategy see issuance in foreign markets up to CZK 140B.

The domestic fixed-income market will probably slip into a wait-and-see mode now ahead tomorrow’s CNB interest-rate-setting meeting. Given a positive developments of Greece’s sovereign credit spreads we might also see some asset-swap tightening in the Czech market.