As expected, more action seen

Polish Zloty (EUR/PLN) – new president!

The recent presidential elections brought the biggest political surprise in the last decade. Andrzej Duda (from the rightist Law and Justice party) won the elections with 52% of the votes beating the favorite Bronislaw Komorowski (current president). Both made promises on how to improve the economy but most of them were pure fantasy. Bottom line – there is no money in the budget to realize at least 50% of those promises. Nevertheless, the market (stocks and the PLN) reacted instantly as Komorowski was regarded as more business friendly. Now, everybody is curious about the first decisions of the new president (when he officially takes over the position of course). The economy itself is not in a bad state. Unemployment in April dropped to 11.2%, its lowest level in years. First quarter GDP was confirmed at 3.5%. Poland is no longer under the strict EU jurisdiction regarding finances as the deficit of public finances to GDP dropped below the 3% limit. The worrisome sign is that government officials are ready to spend money. Instead of building an account surplus for harder times, government spending can accelerate soon. Nevertheless, the situation does not seem bad when we look at economic indicators.
As we see on the daily chart, the market opened higher after the weekend when it seemed obvious that Andrzej Duda won the presidential elections. After a small corrective movement back to 4.10, the EUR/PLN shot up to 4.15 when the official results were published. Currently, the PLN is being traded around 4.13 and if the 4.12 support is broken it will target 4.10 again (the stochastic oscillator support such scenario). Otherwise, the market will attack 4.15, and is this resistance is broken, the next target will be at 4.18.



Pic.1 EUR/PLN D1 source: xStation

Hungarian Forint (EUR/HUF) – Balancing on the edge

The Monetary Plicy Council of Hungary’s central bank (MNB) has lowered the benchmark policy rate by 15 basis points to a new record low of 1.65% on Tuesday. Because of the low inflation there was no other choice. On the other hand, the economy continues to grow strongly. The most recently-released flash Q1 GDP data showed that output rose by 3.4% (yearly basis), the same as in Q4 of last year. One driver of this number was the pick-up in consumer spending, helped by falling prices, which in turn have boosted real wage growth. Also, Hungary’s rate of unemployment eased to 7.6% in February-April 2015 from 7.8% in January-March. This can give positive outlooks from credit rating agencies. Fitch Ratings has affirmed Hungary's long-term foreign currency rating at BB+. Moody’s and S&P have a stable outlook for Hungary. The reviews scheduled for 2015 give Hungary four chances to get back to IG this year, but even experts do not agree on how significant market impact an upgrade could exert. Only a positive progress would help the Hungarian currency.

From the technical point of view, the 50% Fibonacci level is the target for Euro bulls. Having in mind the Greek problem there are little chances for a Forint positive movement. Next week, traders will focus on US labor market data and the upward trend could remain in the next few weeks. The EUR/HUF is also moving above the 100 and 200 DEMA which also signals the local currency can keep depreciating.




Pic.2 EUR/HUF D1 source: xStation

Romanian Leu (EUR/RON) – Deeper markets.. just not now

The Government and Regulatory Bodies want more of nonbank financing towards the economy, in order to promote stability. As praiseworthy as this may be, it is difficult to see effects in the short term. We may move towards a more heterogenous floating area as the economy weans off its EUR denominated credit dependence, and the Governor of NBR hinted that a 5% band is very much ok, but it may take time. Now moving to the near term, we see interest for a large (2.7 bn. EUR nominal, possibly traded at a fraction of that) NPL chunk on sale from the largest commercial bank willing to clear its balance sheet. This possibly means one move lower for EUR/RON, while we would likely see as well a push higher by June 22. So, with two large roughly equivalent at around half a bn. EUR trades, would there not be a good idea to have coordination among operators to offset the tickets? It may be a reasonable idea, but far from a sure shot. We view next week as largely dependent on Greece and overall risk sentiment, and without any “whale” trade, a lateral to mildly RON-favorable outset, provided no default in Athens.

From a technical perspective, we have a wildly non-rectangular consolidation area, that may continue for a while. Familiar resistances at 4.4525 and 4.4750 are only completed by support at 4.4315 and 4.4150. While the inside interval may live for now, it is very likely that in only a few sessions we may have a break towards the larger 4.4150 to 4.750 range. A rejection from each of these will possibly offer a 100 to 200 pips short-term window of trading.




Pic.3 EUR/RON D1 source: xStation