KBC Market Research Desk
KBC Bank
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Financial turmoil in Russia hits Central Europe
MNB keep rates on hold
Regional events were overshadowed by the turmoil in Russia yesterday. Markets paid little attention to the MNB meeting as the MNB kept its rates on hold at 2.1% as expected. Although new inflation outlook is more dovish, it is clear that external environment will play an important role in future MNB’s decision. Today the Czech National Bank holds its meeting. Nevertheless we expect that, like the MNB yesterday, the CNB will hardly bring any surprise and the market impact will thus be negligible.
There’s no doubt that the situation in Russia is the eye-catcher these days. Although Germany is by far the largest trading partner for the Central European countries, the sharp drop of the Russian rouble (during yesterday’s session, the Russian currency was even losing about 20% of its value against USD) did not leave the region untouched. The most affected was the Hungarian forint. Although Hungary’s exposure to Russia in terms of exports is not large (around 2.4% of all exports went to Russia in Q2 2014), its financial exposure is probably the highest among the regional economies. The Hungarian forint lost 1.2% yesterday and ended the session at 312.4 EUR/HUF, the weakest value in last three month. Contagion spread to Poland as well and the zloty lost 0.7%. The least affected was the Czech koruna, which erased all its early losses before the session end.
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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