Headlines
Currencies: Profit taking corrects previous CE currencies gains
Fixed Income: Lower wage growth in Poland and Hungary support rate cut expectations Hungary’s bond auction initiated huge demand
Czech Republic
The Czech koruna followed the other currencies in the region and it slightly weakened to 25.92 EUR/CZK yesterday. There were no domestic events and so the financial results of the American companies influenced investors' mood on the regional market.
Today we do not expect any large fluctuation of the currency and the koruna can remain stable near to 26 EUR/CZK. Continuing earning season should be the only driving force today.
| Currencies | Close | change |
| EUR/CZK | 25.95 | 0.10% |
| EUR/HUF | 274.4 | 0.00% |
| EUR/PLN | 4.322 | 0.40% |
| USD/PLN | 3.049 | 0.00% |
| EUR/USD | 1.408 | 0.10% |
| USD/JPY | 93.7 | -0.60% |
| Bonds 2Y | Close | change |
| Czech Rep. | 2.55 | -0.26 |
| Hungary 3Y | 9.06 | -0.06 |
| Poland | 5.1 | -0.08 |
| Slovakia | 2.64 | 0.03 |
| Eurozone | 1.24 | -0.05 |
| USA | 0.97 | -0.01 |
| Bonds 10Y | Close | Change |
| Czech Rep. | 5.93 | 0.13 |
| Hungary | 8.77 | -0.2 |
| Poland | 6.22 | 0.03 |
| Slovakia | 5.1 | -0.18 |
| Eurozone | 3.33 | -0.06 |
| USA | 3.56 | -0.02 |
Hungary
Thursday was generally quiet on the Hungarian FX market, with the forint trading around 273.00-274.00. However the news headlines from Indonesia hurt the general emerging market sentiment and the pair dropped slightly to 275.00 overnight.
The bond auction saw good demand. The 3-, 5- and 10-year bonds received bids in excess of Ft150bn, close to 3-times the offered amount. Interest for Hungarian convergence bonds has thus been remarkably strong. Together with the issuance of a €1bn eurobond at a price of mid swap +400bps, this could support the currency, as well. The eurobond issuance marks the government’s ability to finance its external debt from market sources, which was one of the goals of last October’s IMF program. If the current risk aversion fades, this news could keep the market on a positive trend.
Poland
Yesterday the Polish Zloty experienced a volatile session. Early in the session, the strengthening in previous days initiated profit taking supported by lower than expected wage growth. Later on, positive J.P.Morgan results and a successful auction of Hungarian government bonds temporary supported the region and the zloty. Nevertheless, the intraday strength of the zloty could not be sustained and the zloty even closed the session slightly lower.
Today, PPI and industrial production will be released. While industry prices may decline again, industrial production estimates are expect to show positive growth in June. The main impulse, however, may come from the global markets especially from continuing U.S. earnings results.
