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The Central European currencies saw a calm session yesterday. While the koruna remained in the vicinity of Czech National Bank’s (CNB) intervention level, the zloty and the forint posted small gains against the common currency.
Meanwhile, market speculations about CNB cutting its interest rates below zero have increasingly manifested themselves on the Czech government bond yield curve. In the course of the last couple of days, yields have dropped markedly along the whole curve. The two-year government bond yield not only hit its alltime low (well below zero), but slid even below the level of its German “benchmark” for the first time since January 2014. In our view, though, probability of introduction of negative interest rates by the CNB has remained rather small.
Today, all eyes are on the results of the FOMC meeting. We don’t expect a policy change from the Fed, while also a verbal hint for a September rate hike is unlikely. We believe that such scenario is discounted by markets and shouldn’t leave a big stamp on trading. At the same time, we keep our view that once the Fed decides to hike, this would be a negative factor for both zloty and the forint.
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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