KBC Market Research Desk
KBC Bank
Headlines
Polish economy still in deep deflation
EUR/CZK forwards close to the CNB intervention floor
The Central European currencies were under mild pressure yesterday. While the zloty and the koruna slightly weakened, the forint settled only little changed on comments of NBH Deputy Governor Nagy who tried to lower excessive rate cut expectations (see the previous issue of this report for more information). The zloty meanwhile stays close to 2-1/2 month low hit earlier this week.
Regarding the koruna, it also slightly weakened and what is even more interesting, due to the generally calmer situation in money markets, 12 month EUR/CZK forward trades very close to the CNB intervention floor (EUR/CZK 27.0). This may be interesting for some market participants (i.e. exporters) as, strictly speaking, current forecast of the CNB assumes that “the exchange rate will be used as a monetary policy instrument until the end of 2016”. Although we expect that the CNB may exit the intervention regime rather in May 2017, the option of the earlier exit cannot be in principle excluded entirely.
Today, the focus is on the release of preliminary estimate of Polish inflation for April. We believe it will indicate stagnation of the year-on-year inflation rate at - 0.9%. Although this is a touch higher in comparison with market expectations, we do not expect significant reaction of the zloty to the release. While prices probably grew quite rapidly on the month-on-month basis (+0.4%), with a contribution from increased fuel prices, inflation in general is still well below the central bank’s target, and we, just like the central bank, believe that a return to the target is nowhere to be seen at the moment.
| Currencies | % chng | |
| EUR/CZK | 27.03 | 0.0 |
| EUR/HUF | 311.2 | 0.0 |
| EUR/PLN | 4.40 | 0.3 |
| EUR/USD | 1.14 | 0.3 |
| EUR/CHF | 1.10 | -0.2 |
| FRA 3x6 | % | bps chng |
| CZK | 0.28 | 0 |
| HUF | 0.88 | 4 |
| PLN | 1.62 | -1 |
| EUR | -0.26 | -1 |
| GB | % | bps chng |
| Czech Rep. 10Y | 0.48 | -2 |
| Hungary 10Y | 3.32 | 6 |
| Poland 10Y | 3.08 | -1 |
| Slovakia 10Y | 0.84 | -3 |
| CDS 5Y | % | bps chng |
| Czech Rep. | 42 | 0 |
| Hungary | 144 | -1 |
| Poland | 87 | 0 |
| Slovakia | 41 | 0 |
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.
Recommended Content
Editors’ Picks
EUR/USD climbs to 10-day highs above 1.0700
EUR/USD gained traction and rose to its highest level in over a week above 1.0700 in the American session on Tuesday. The renewed US Dollar weakness following the disappointing PMI data helps the pair stretch higher.
GBP/USD extends recovery beyond 1.2400 on broad USD weakness
GBP/USD gathered bullish momentum and extended its daily rebound toward 1.2450 in the second half of the day. The US Dollar came under heavy selling pressure after weaker-than-forecast PMI data and fueled the pair's rally.
Gold rebounds to $2,320 as US yields turn south
Gold reversed its direction and rose to the $2,320 area, erasing a large portion of its daily losses in the process. The benchmark 10-year US Treasury bond yield stays in the red below 4.6% following the weak US PMI data and supports XAU/USD.
Here’s why Ondo price hit new ATH amid bearish market outlook Premium
Ondo price shows no signs of slowing down after setting up an all-time high (ATH) at $1.05 on March 31. This development is likely to be followed by a correction and ATH but not necessarily in that order.
Germany’s economic come back
Germany is the sick man of Europe no more. Thanks to its service sector, it now appears that it will exit recession, and the economic future could be bright. The PMI data for April surprised on the upside for Germany, led by the service sector.