Headlines
Currencies: Polish industrial production grew strongly in June
Czech Republic
The Czech koruna extended its gains on the back of the positive global sentiment on Friday. Hence, the EUR/CZK pair finished the week lower – at the 25.875. There were no domestic events to explain the price action, beside still bullish sentiment in emerging markets.
Interestingly, Vice Chairman Bohuslav Sobotka of the strongest opposition party said that if ČSSD (Soc-Dem) wins the elections, it will be able to undertake any major steps in (economic policy) only in the second half of its term. The reason is the recession. Sobotka added it would not be possible to promise voters an improvement in their social position at the cost of more government debt. We consider such a comment as positive for the koruna and fixed-income assets in the long-rung, as it would mean that even the Social democrats will be fiscally conservative, if they win elections in October. This week will be unattractive from a domestic point of view. So the koruna will continue to watch the ongoing earnings season and other CE markets. Technically, the EUR/CZK pair should stay above the 25.65 level.
| Currencies | change | |
| EUR/CZK | 25.89 | -0.2% |
| EUR/HUF | 273.0 | -0.5% |
| EUR/PLN | 4.305 | -0.4% |
| USD/PLN | 3.049 | 0.00% |
| EUR/USD | 1.418 | 0.8% |
| USD/JPY | 94.7 | 1.1% |
| Bonds 2Y | change | |
| Czech Rep. | 2.80 | 0.25 |
| Hungary 3Y | 9.10 | 0.04 |
| Poland | 5.08 | -0.01 |
| Slovakia | 2.56 | -0.08 |
| Eurozone | 1.30 | 0.07 |
| USA | 1.01 | 0.04 |
| Bonds 10Y | Change | |
| Czech Rep. | 5.83 | -0.10 |
| Hungary | 8.83 | 0.06 |
| Poland | 6.19 | -0.03 |
| Slovakia | 5.22 | 0.12 |
| Eurozone | 3.44 | 0.11 |
| USA | 3.70 | 0.14 |
Hungary
On Friday, EUR/HUF basically held a sideways trading pattern. The forint recorded some marginal gains early in the session. The successful sale of a 5-year euro denominated bond (1 billion) probably supported the sentiment toward Hungary and its currency. However, the gains could not be maintained and some profit taking on HUF long positions kicked in later in the session..
This morning, the forint is again well bid, supported by the positive sentiment on global markets. Later this week, the eco calendar in Hungary is thin. Friday’s retail sales release is the only data series of importance. Markets will start to look out for next week’s NBH interest rate decision. The market expects that the recent improvement in investor sentiment toward Hungary will allow the bank to cut rates by 50 basis points.
Poland
The Polish zloty stayed in sideways mode around 4.33 EUR/PLN on Friday. Better than expected industrial output failed to support the currency. The Polish industry fell only 4.3% y/y in June while the producer prices surprisingly accelerated. This seems to support our base scenario of a no-change verdict for the NBP for the rest of the year.
The most important figure of this week will be the retail sales, scheduled for Thursday. Domestic consumption is crucial for the Polish economy, which has survived the storm better than its regional peers. We may see now more negative spill-over effects from the weak labour market, which may surprise part of the market. Nevertheless, sentiment at the start of the week could be more optimistic, mostly thanks to the positive sentiment on the global equity markets.
