Headlines
Currencies: All CE currencies weaken as risk aversion returns
Fixed Income: Czech central bank governor surprisingly voted for a rate cut
Czech Republic
The Czech koruna shrugged off the better-than-expected flash estimate for the August industrial production and tracked the rest of region lower. Recall that Industrial production fell y/y by an estimated 8.1% in August, after dropping by 18.2% in July, 11.8% in June and 21.3% in May. This positive news was, however, counterbalanced by an announcement from the biggest Czech car maker Skoda-Auto, which indicated that it was considering to lay-off some workers and shorten the work week due to weak demand. Demand dropped significantly as the German cash-for-clunkers ended in May.
So, the EU/CZK pair moved north and hit a two-week high (just below 25.5), due to global equity sell-off and heavy pressure on the Romanian currency.
Today, all eyes will be on the US payroll report, which will set the tone for trading on all markets, including the koruna.
Despite, quite violent trading in core markets the Czech yield curve was only little changed yesterday as short rates and yields dropped by around 1 bp. The market ignored both a release of the Czech IP production flash estimate figures and monthly budget results.
Today – ahead of the US payroll report the market is going to read the CNB Minutes from the last meeting, which surprisingly showed that both heavy weights in the bank Board – governor Tuma and vice governor Singer voted for a rate cut. These might trigger more betting on a rate cut in November. So, the short-end of the curve could move even lower despite a weaker koruna.
| Currencies | change | |
| EUR/CZK | 25.46 | 0.80% |
| EUR/HUF | 271.7 | 0.80% |
| EUR/PLN | 4.285 | 1.50% |
| USD/PLN | 2.94 | 2.30% |
| EUR/USD | 1.453 | -0.20% |
| USD/JPY | 89.2 | -0.60% |
| Bonds 2Y | change | |
| Czech Rep. | 2.39 | -0.11 |
| Hungary 3Y | 7.42 | -0.01 |
| Poland | 5.14 | 0.02 |
| Slovakia | 1.74 | -0.05 |
| Eurozone | 1.2 | -0.08 |
| USA | 0.87 | -0.08 |
| Bonds 10Y | change | |
| Czech Rep. | 4.94 | -0.02 |
| Hungary | 7.89 | 0.02 |
| Poland | 6.24 | 0.04 |
| Slovakia | 4.51 | 0 |
| Eurozone | 3.13 | -0.11 |
| USA | 3.17 | -0.14 |
Poland
The Polish currency had very tough session on Thursday. The sell off on the global equity markets and political tensions in Romania weighed on the Polish currency. Andrzej Wojtyna of NBP said that there was no reason for the currency to appreciate, which could have added to the pressure.
The pair broke definitely above 4.21 EUR/PLN which turns our short term view to the bearish mode. We see risks for the zloty to go as high as 4.40 in the short run. Today the pair should eye the US jobs report and the subsequent reaction of the emerging markets. Under current negative sentiment the zloty might continue to weaken. Nevertheless our mid-term view, based on Polish fundamentals and the fact that zloty has quite an attractive carry, remains positive.
