Headlines
Czech koruna eased to 27.50 EUR/CZK
NBH will again cut rates by 10 basis points
The Czech koruna eased to its one-month low against the euro yesterday. The overall volatility has remained very low nevertheless and we expect that it will not rise significantly in coming months either. According to CNB Governor Singer, central bankers are cautiously optimistic regarding economic growth and due to disinflation pressures ready to prolong the temporary FX intervention regime at least until mid 2015. As for other regional FX markets, the Polish zloty as well as the Hungarian forint varied inside a relatively narrow range around their current levels.
Today the regional focus will be on a rate-setting meeting of the Hungarian central bank. In line with market consensus, we believe that the NBH is going to deliver another 10 bps rate cut after which the base rate will reach its new all time low (2.2 %). Inflation is the principal argument in favour of the rate cut. Hungarian inflation slipped into negative territory in April and has continued to fall deeper since then. In June, the headline inflation was -0.3 % y/y. Given latest inflation readings, the NBH lowered its inflation forecast for 2014 from 0.7 % to 0.0 %. It is worth nothing, though, that a substantial portion of the price fall is due to administrative price cuts while the core inflation remains around 2.5 %. Another argument for the expected rate cut is CDS spreads, which, although having widened recently, remain near their all-time lows. On the other hand, the Hungarian forint has been relatively weak and further easing of monetary policy would make his recovery harder. The weak forint is a serious issue in Hungary mainly due to a considerable volume of outstanding FX loans. After long discussions, the government finally prepared a relief scheme for those indebted in foreign currency, according to which Hungary’s banks will be obliged to convert foreign currency-denominated loans into forint loans most probably at the end of this year (December 31 – January 1).
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 steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.