Headlines
Currencies: Polish central bank should stay on hold
Poland
The Polish zloty weakened as sentiment on global equity markets deteriorated after a weaker than expected US consumer confidence. Furthermore the zloty was concerned about dramatic the 22% contraction of the Lithuanian economy in the second quarter, which re-emerged fears concerning the Baltic contagion. These news items overshadowed otherwise positive news on a final agreement of neighbouring Latvia with IMF. The zloty gave up some of the recent gains and came back to 4.18 EUR/PLN.
The MPC meeting should end with a no-change verdict today. We believe in slightly hawkish comment (based on last series of more optimistic data), which may rule out the option of further interest rate cuts in the upcoming months. That could be slightly surprising and modestly supporting for the zloty. Nevertheless the main driver of Polish FX market is still the global risk appetite. As it seems the global rally has run out of steam for a while, we bet on moderate weakness of the zloty for today.
| Currencies | change | |
| EUR/CZK | 25.56 | 0.3% |
| EUR/HUF | 270.4 | 1.6% |
| EUR/PLN | 4.200 | 0.9% |
| USD/PLN | 2.967 | 0.4% |
| EUR/USD | 1.416 | -0.9% |
| USD/JPY | 1.416 | -1.0% |
| Bonds 2Y | change | |
| Czech Rep. | 2.73 | 0.06 |
| Hungary 3Y | 8.80 | -0.10 |
| Poland | 5.05 | 0.03 |
| Slovakia | 2.59 | 0.05 |
| Eurozone | 1.35 | -0.03 |
| USA | 1.11 | 0.06 |
| Bonds 10Y | Change | |
| Czech Rep. | 5.53 | -0.04 |
| Hungary | 8.59 | -0.07 |
| Poland | 6.25 | 0.06 |
| Slovakia | 5.18 | 0.03 |
| Eurozone | 3.42 | -0.08 |
| USA | 3.64 | -0.08 |
Czech Republic
Yesterday the Czech koruna weakened from an opening level of EUR/CZK 25.46 to 25.480. The Czech currency followed their Central European peers. There were no fresh eco data released, but CNB vice governor M. Hampl commented that he was not convinced that a rate cut is needed. The koruna, however, was influenced by the Lithuanian’s GDP fall confirming strong problems of other countries in the region. Another impetus was also the mood on global markets, which cooled the interest in risky assets.
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.
Hungary
The Hungarian forint continued this week’s weakening trend and the pair slipped through the key support level of 270.00 overnight and was trading tad below that level this morning. Renewed risk aversion globally contributed to the bearish sentiment and the central bank’s bigger rate cut on Monday also opened the way for a downside trend. Overall, the forint could weaken a bit further in our view and the next key level of 272.00 could be tested shortly.
