Headlines
Currencies: Czech koruna leads regional gains attacking the EUR/CZK 25.00 barrier
Fixed Income: Polish wages grew slower than expected
Czech Republic
The Czech koruna ignored the Political turmoil yesterday. The delay of early elections was finally taken rather positive as it is legally a more certain way and it raises chance of budget compromise for 2010. Also rather hawkish comments from otherwise dovish board member Pavel Rezabek could have supported the koruna. Nevertheless it is still global positive sentiment and the weakness of US dollar that supports the Czech currency.
If that prevails we can see further strengthening. The koruna was testing 25.00 EUR/CZK in the morning and it can be further supported if we see political parties approaching consensus on the budget.
The Czech fixed income market faced some mixed factors yesterday, so the yield curve has changed just marginally. While the market heard some surprising comments form the biggest dove in CNB Bank Board Pavel Rezabek, the strong koruna acted as a positive factor for the front end of the curve. It was visible in a successful bond auction. The Ministry of Finance offered CZK 7B of 3-year floaters. As investors preferred shorter maturities the auction invoked rather solid demand exceeding 2.29 times the offered amount. At the end, the ministry sold papers for CZK 7.576B with the average yield 31.933 bps above the 6-month Pribor of 3.69%. The previous tranche of the same paper issued mid August raised also high demand exceeding 2.17 times offered amount.
Today, the domestic calendar is empty, but the yield curve (and particularly the front end) will track the EUR/CZK pair, which has been heading down.
| Currencies | change | |
| EUR/CZK | 24.98 | -1.40% |
| EUR/HUF | 268.9 | -0.50% |
| EUR/PLN | 4.102 | -1.10% |
| USD/PLN | 2.78 | -1.40% |
| EUR/USD | 1.475 | 0.30% |
| USD/JPY | 90.9 | 0.60% |
| Bonds 2Y | change | |
| Czech Rep. | 2.47 | -0.05 |
| Hungary 3Y | 7.85 | -0.1 |
| Poland | 5.08 | -0.08 |
| Slovakia | 1.91 | -0.03 |
| Eurozone | 1.3 | 0.06 |
| USA | 1 | 0.08 |
| Bonds 10Y | change | |
| Czech Rep. | 5,08 | 0 |
| Hungary | 8.18 | -0.14 |
| Poland | 6.07 | -0.13 |
| Slovakia | 4.8 | -0.03 |
| Eurozone | 3.37 | 0.09 |
| USA | 3.48 | 0.06 |
Poland
The Polish zloty further strengthened and gained more than 1% in yesterday’s session, which was purely due to continuously improving sentiment on global markets. Hence the pair got easily to the 4.10 EUR/PLN neighbourhoods and ignored the fact that corporate wages grew less than expected (3.0%) and employment did not deteriorate as fast as expected (-0.1%). It does not collide with our recovery scenario for the Polish economy as we expect the labour market to lag for a while behind the economy.
Today figures should show the Polish industrial output turning into positive territory, which could provide further support for the Polish currency. Hence if the optimism on the global markets prevails, we may see the zloty near 4.00 EUR/PLN soon
Hungary
The Hungarian forint kept on the good mood created by equities and broke through the key resistance level at 270.00/€. It seems that the currency is able to gain on positive global sentiment despite some policy makers arguing for a weaker currency around the 280.00/€ level.
Today’s wage data showed lack of wage pressures in the economy as gross wages grew only at 1.4% Y/Y in July. This fits well into the expected path of disinflation.
The Hungarian fixed income market had a good day as the currency and yields dipped below the key 8.00% level at the long-end, as well. The short-end started to digest the possibility of a sub-6% base rate for next year and today’s 1-year T-Bill auction could give us more guidance about the depth of the market.
