Headlines
Currencies: Forint and zloty strengthened, neglecting the situation in Latvia
Fixed Income: Hungarian bond yields moved higher
Czech Republic
The Czech koruna depreciated slightly below modest downward pressure yesterday. Part of the story could be related to ongoing fears from Latvia’s devaluation, but since the koruna partly decoupled from the zloty and the forint, we think that carry trades on the PLN/CZK could be blamed. Hence, the EUR/CZK pair topped around the 27 figure. Today, wage figures for the first quarter are not a market mover (average wage grew 1.0 % Y/Y). The koruna might watch at other markets and particularly at the developments in global equity markets after today’s release of the US payrolls.
The Czech yield curve flattened slightly in thick trading volume on Thursday. The domestic scene had no important incentives. The market movement was rather small as higher stock markets and the weaker currency prevented yields from significantly changing. Especially the losses at the short end of the curve were very small even if a rate cut could not be excluded.
Today’s wage development release could show a small increase and confirm that inflationary pressures play no role. If the koruna corrects yesterday’s losses, yields may continue go down. However, later on the koruna could recede again and the yield decrease may be limited.
| Currencies | Close | change |
| EUR/CZK | 27.00 | 0.4% |
| EUR/HUF | 286.8 | -0.3% |
| EUR/PLN | 4.500 | -0.6% |
| USD/PLN | 3.113 | 0.0% |
| EUR/USD | 1.421 | 0.0% |
| USD/JPY | 96.6 | 0.5% |
| Bonds 2Y | Close | change |
| Czech Rep. | 2.96 | 0.02 |
| Hungary 3Y | 10.59 | 0.30 |
| Poland | 5.52 | -0.02 |
| Slovakia | 0.67 | 0.00 |
| Eurozone | 1.60 | 0.17 |
| USA | 0.97 | 0.04 |
| Bonds 10Y | Close | change |
| Czech Rep. | 5.89 | 0.04 |
| Hungary | 10.62 | 0.39 |
| Poland | 6.33 | -0.01 |
| Slovakia | 5.10 | 0.00 |
| Eurozone | 3.66 | 0.07 |
| USA | 3.73 | 0.16 |
Hungary
The Hungarian forint stabilized between the 286 and 288 levels yesterday. This morning’s industrial output figure came in at -25.3% Y/Y. The currency tried to weaken to below 288 again, but initial worries softened rapidly. Somewhat better global market sentiment could also help the currency for now, while the weekend’s election could create political uncertainty next week. It seems that the new right-wing Jobbik party will get strong support and this could undermine the position of the technocrat government.
The Hungarian bond market remained broadly unchanged, while yesterday’s auction results showed higher demand for the bonds. The agency sold small amounts of 3-, 5- and 10-year bonds and was able to raise the issued amount. This could be a slightly positive sign about the chances for a recovery in the government financing, but of course it will take a long-time before the full market based solution is restored.
Poland
The Polish zloty firmed slightly yesterday as the market shrugged off ongoing rumors about Latvia’s devaluation and enjoyed positive sentiment in emerging and equity markets. Hence, the EUR/PLN pair dropped below the 4.50 level temporary. Like yesterday the zloty’s price action will be effectively driven by foreign markets today, because the next important macroeconomic figure will be the May CPI, which will be released in ten days. Hence, if central bankers don’t surprise by some comments, the zloty will focus on the outcome US payrolls this afternoon.
