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Currencies: CE currencies (PLN, CZK and HUF) are testing key resistance levels
Czech Republic
Yesterday, the EUR/CZK broke below the key technical resistances at the 25.65 and the 25.600 level. This bullish move for the koruna was a result of ongoing positive sentiment on global equity markets, which supports the whole emerging markets’ universe. So, the koruna closed at its highest level for this year yesterday.
The domestic calendar is again empty, so the koruna will continue to watch global equity markets, while EU’s business sentiment indicators might be interesting too. The stronger exchange rate is helpful for the inflation outlook. So, we will keep a close look at Czech central bankers’ comments, in case they would like to express their opinion ahead of the upcoming Bank Board meeting in early August.
| Currencies | change | |
| EUR/CZK | 25.57 | -0.5% |
| EUR/HUF | 268.9 | -0.8% |
| EUR/PLN | 4.226 | -0.4% |
| USD/PLN | 2.985 | 0.1% |
| EUR/USD | 1.420 | -0.3% |
| USD/JPY | 94.8 | 0.8% |
| Bonds 2Y | change | |
| Czech Rep. | 2.82 | 0.00 |
| Hungary 3Y | 8.98 | -0.01 |
| Poland | 5.06 | 0.03 |
| Slovakia | 2.58 | 0.05 |
| Eurozone | 1.32 | 0.04 |
| USA | 1.03 | 0.09 |
| Bonds 10Y | Change | |
| Czech Rep. | 5.57 | -0.22 |
| Hungary | 8.72 | -0.03 |
| Poland | 6.16 | -0.03 |
| Slovakia | 5.22 | 0.04 |
| Eurozone | 3.47 | 0.05 |
| USA | 3.68 | 0.13 |
Hungary
On Thursday, the forint posted again quite a strong performance. As there were no eco data in Hungary, the move was primarily driven by the improved global investor sentiment. The forint rally accelerated after the better than expected US housing data. EUR/HUF dropped below the 270 mark and the pair even came close to the key 267.40 support area (early July low). However, a real test/break of this level didn’t occur.
In an interview, the IMF representative in Hungary welcomed the successful sale of a Eurobond last week, but said that the focus should be on debt reduction. He also indicated that reaching the budget deficit target for next year of 3.8% o GDP was important, but that it could be difficult.
This morning, the Hungarian retail trade data came out perfectly in line with the market consensus (-4.2 Y/Y). The release had no big impact on the currency market. The forint remains well bid and EUR/HUF is still holding close the 268 barrier. Sentiment toward the forint remains positive, but for the EURHUF pair to break the 267.40 support area, additional stock market gains are probably needed. Investors might also turn to a wait-and-see mode ahead of Monday’s NBH interest rate decision.
Poland
The Polish zloty gained on stronger retail sales and positive sentiment on the global equity markets. We were surprised by better than expected retail sales and not only by the headline by partly by the structure. The improvement does not reflect only continuing elevated inflation, but we see important stabilisation in previously depressed car sales. Nevertheless it is one more reason for the NBP to stay on hold till the end of the year, which has been our base line scenario since the last meeting.
For the end of the week the domestic calendar is rather empty. The zloty is approaching crucial technical levels at 4.21 EUR/PLN (2008 highs). The positive sentiment on the global equity markets could drive the zloty to test these levels.
