Review

  • Yesterday, during the business presentation at Bloomberg news agency, the South African Finance Minister, Pravin Gordhan, said that he is looking at the impact of the carry trade and considering the options he has to curb currency volatility. At the same time, Gordhan said that South Africa has no plans to impose capital controls as did, for instance, Brazil in October last year with its tax on capital inflows with the intention of halting the sharp appreciation of the BRL. It is known that the strength of the rand is a thorn in the side of the South African official, as the strong currency clearly undermines the competitiveness and consequent economic recovery in South Africa. On many occasions, the South African officials verbally tried to curb the excessively strong rand. 

  • Yesterday, following the NBP Governor Skrzypek’s hawkish comments made on Wednesday, another Polish central banker, the Zielinska-Glebocka, added to the hawkish tone of the NBP by stating that two small rate hikes are probable in the second half of 2010. While talking about the shifting from a neutral to tightening bias, she said that the MPC should refrain from changing its bias for another few months. 

  • The Icesave referendum will take place on Saturday this week. Polls show a solid victory for the no-side. A refusal by the Icelanders to compensate British and Dutch account holders may have consequences for their future ability to access IMF funds.


Preview

  • Estonian inflation for February is one of the most interesting economic figures due for release today.

Trading update

  • The hawkish comments made by the Polish central banker Zielinska-Glebocka were clearly Polish zloty positive with the PLN firming strongly on the back of the comments. The PLN again outperformed its regional peers yesterday. Our trade recommendation based on our EMEA FX Scorecard of Buy PLN/HUF is still the “trade to have”.