Headlines
Currencies: Polish and Hungarian markets eye June’s inflation readings
Poland
The Polish zloty finished a bit weaker on Friday, despite some positive indications from the government authorities that the currency could enter into the ERM2 already in the second half of this year. Probably, the market considers these comments as too ambitious given the fact that Poland will not be able to fulfill the budget deficit criteria for the EMU entry till 2011.
This week is full of heavy data. We believe that CPI and wage data should confirm easing wage pressures. Nevertheless these should not be enough to convince the NBP to cut the rates further. More focus may finally be on the industrial output which may provide some signs of relief in the economy. Finally, the zloty should reflect more the sentiment on the global markets with clear focus on US earnings season.
| Currencies | Close | change |
| EUR/CZK | 26.08 | 0.10% |
| EUR/HUF | 278.6 | 0.60% |
| EUR/PLN | 4.407 | 0.70% |
| USD/PLN | 3.098 | 0.00% |
| EUR/USD | 1.393 | 0.10% |
| USD/JPY | 92.2 | -0.50% |
| Bonds 2Y | Close | change |
| Czech Rep. | 2.79 | -0.04 |
| Hungary 3Y | 9.36 | 0 |
| Poland | 5.3 | 0.02 |
| Slovakia | 2.62 | -0.02 |
| Eurozone | 1.23 | 0.01 |
| USA | 0.88 | -0.04 |
| Bonds 10Y | Close | change |
| Czech Rep. | 5.82 | 0 |
| Hungary | 9.24 | -0.02 |
| Poland | 6.24 | 0.01 |
| Slovakia | 5.16 | 0.06 |
| Eurozone | 3.25 | -0.04 |
| USA | 3.27 | -0.08 |
Czech Republic
The Czech koruna finished last week little changed as the market clearly lacked strong stimuli for price action, which would help the EUR/CZK pair to leave the 26 figure.
Since today’s final IP and construction figures will be hardly a market mover, it does not alter the fundamental picture of the Czech economy. Let us remind that while the domestic industry dropped 22 % Y/Y, construction activity was down 2.1 % Y/Y in May. Hence, the koruna will stay in wait-and-see mode, waiting for the real start of the US earnings seasons tomorrow.
Hungary
The Hungarian forint had a bad day on Friday as the global emerging market correction hurt the Hungarian currency again. This time the pair slid to as low as 279.00, close to last week’s low of 280.00. The question for this week could be whether the range of 275.00-280.00 will hold on or it will be broken on the weak side.
We have seen broad weakening of EMFX and expectations for a deep rate cut may also lead to a forint weakening. The central bank meeting will take place later in the month, so the current setup could remain with us for the next two weeks. Consumer price data tomorrow may alter the picture somewhat if the figure deviates significantly from the expected 4.0-4.1% Y/Y reading, but otherwise it may pass on unnoticed.
