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Currencies: Hungarian central bank surprises with 100 bps cut
Czech Republic
The Czech koruna kept its bullish sentiment and hovered just below the 25.500 level. There was no reaction to the 100 bps rate cut in I Hungary and better readings in domestic business sentiment. Still however, it remains below levels in the autumn 2008. In this respect, it is interesting that despite better sentiment, the biggest auto-maker in the Czech Republic – Skoda Auto of VW – just announced that it was considering introducing a shorter work week as of next year.
Today, the domestic calendar is once again empty, so the koruna will focus on developments in other markets (particularly on global equities and the zloty). Nevertheless the domestic markets are still waiting for some comments from Czech rate-setters, who should indicate their opinions ahead of the August Bank Board meeting.
| Currencies | change | |
| EUR/CZK | 25.49 | 0.10% |
| EUR/HUF | 266.3 | 0.10% |
| EUR/PLN | 4.163 | -0.10% |
| USD/PLN | 2.956 | 0.00% |
| EUR/USD | 1.429 | 0.20% |
| USD/JPY | 95.1 | 0.20% |
| Bonds 2Y | change | |
| Czech Rep. | 2.67 | -0.13 |
| Hungary 3Y | 8.9 | 0 |
| Poland | 5.02 | -0.02 |
| Slovakia | 2.53 | 0.04 |
| Eurozone | 1.39 | 0.02 |
| USA | 1.05 | 0.02 |
| Bonds 10Y | Change | |
| Czech Rep. | 5.57 | 0.04 |
| Hungary | 8.66 | -0.01 |
| Poland | 6.18 | 0.01 |
| Slovakia | 5.15 | -0.01 |
| Eurozone | 3.5 | 0 |
| USA | 3.73 | 0.03 |
Hungary
The central bank’s bigger-than-expected 100bp rate cut weakened the Hungarian forint temporarily and the pair slipped to 268.00 from about 267.00 in the afternoon. However, the correction did not last for long and the currency was able to recover to 266.00 on prospects for more rate cuts.
Central bank’s statement highlighted that inflation is expected to remain below the 3% medium-term target due to the recession and improving external balance. The bigger move was due to the recent improvement in risk appetite, which could mean that MNB would like to slow down the appreciation trend of the forint.
Poland
The Polish zloty stayed in a positive mood and slightly extended its solid gains from last week. The pair touched 4.15 EUR/PLN mainly thanks to overall resilience of global equity markets towards profit-taking. The zloty also withstood the news that largest coalition party in Latvia does not want to sign the deal with IMF. It just confirms how the CEE region has shifted its attention from local regional risks to global risk aversion – S&P500, VIX.
The data front is empty this week and the only important issue is tomorrow’s NBP meeting. We do not expect any major surprises here. No change verdict and slightly hawkish comment could help the zloty to extend the gains. The doors have been opened to get as far as 4.00 EUR/PLN from a technical point of view.
