Headlines
Currencies: Poland may not meet inflation criteria in 2010
Fixed Income: Regional auctions become more successful
Czech Republic
Yesterday, the Czech currency continued to trade in a very tight range close the EUR/CZK 27.0 level. The koruna slightly outperformed the zloty, which lost a bit, meeting our hypothesis that the Czech currency will not track swing in neighboring markets so closely these times. Interestingly, sales of Škoda Fabias in Germany doubled y/y in the first quarter of 2009, and total exports of Škodas to Germany rose one-third for the period. This means that the upcoming foreign trade figures must look much better. The biggest carmaker and exporter Skoda (VW Group), however, warned that there is a risk of a drop in sales after Germany’s scrap subsidy ends.
Today, the domestic calendar is empty, so the Koruna will probably watch events in core markets and the EUR/USD market. The eye-catcher should be mainly the initial disclosure of outcome the US bank’s stress test.
The Czech yield curve flattened yesterday as the long end was positively influenced by comments coming from the Czech FinMin. Depute Finance Minister Janota confirmed that the stat want to issue around EUR 1bn, though he did not specified when. Nevertheless this information is still supportive for the market, because it indicates that local bond supply should be lower. Today, the domestic calendar is empty so we expect a quiet trading session, while the market’s reaction to important US figures and events might relatively limited, because the domestic market usually closes quite early on Fridays.
No important domestic news is expected for today. The bond market may by quiet again, influenced by regional sentiment. Nevertheless, the expected rate cut could pres short end of the yield curve lower.
| Currencies | Close | change |
| EUR/CZK | 26.89 | -0.2% |
| EUR/HUF | 296.8 | 0.0% |
| EUR/PLN | 4.482 | 1.9% |
| USD/PLN | 3.423 | 0.2% |
| EUR/USD | 1.319 | 1.2% |
| USD/JPY | 96.9 | -1.3% |
| Bonds 2Y | Close | change |
| Czech Rep. | 3.17 | -0.08 |
| Hungary 3Y | 11.00 | 0.00 |
| Poland | 5.54 | -0.01 |
| Slovakia | 2.54 | 0.00 |
| Eurozone | 1.43 | -0.03 |
| USA | 0.95 | -0.01 |
| Bonds 10Y | Close | change |
| Czech Rep. | 5.50 | -0.08 |
| Hungary | 10.81 | -0.08 |
| Poland | 6.18 | 0.00 |
| Slovakia | 4.33 | -0.87 |
| Eurozone | 3.21 | 0.01 |
| USA | 2.93 | 0.00 |
Poland
The Polish zloty weakened further to two weeks’ lows at 4.52 EUR/PLN on Thursday. The investors are taking profit after last week’s rally. The main reason is uncertainty about the further move in risk aversion on the global markets and worsening fiscal situation of Poland that eliminates the chances of the country to adopt the euro fast. Further more the central bank member Dariusz Filar said that Poland may not meet the inflation criteria in 2010. Nevertheless Fillar thinks that “setting another fixed rate would harm the credibility of the whole process”. We do not expect the sentiment on the Polish FX market to improve significantly at the end of the week. Nevertheless it may be difficult for the pair to break above 4.52 EUR/PLN (23.6% Fibonacci retracement and multi-session high).
