Headlines
Currencies: CE currencies still under modest downward pressure
Fixed Income: Polish MinFin successfully sell EUR 910bn worth of euro-bonds
Czech Republic
The Czech koruna extended its losses, which were brought by the current central bank dovish stance together with some kind of contagion from Latvia (and devaluation threat there). Hence, the EUR/CZK pair finished the week just bellow the 26.0 level.
Although, the koruna did not react to the September inflation readings (the year-onyear inflation came at zero) the market took this report as the CNB dovish stance was warranted.
Today, the release of the final industrial production figures for August has confirmed that the economy is falling, but at a slower pace. This will be for the koruna, however, hardly moving factor. The market will rather watch the situation in Latvia, while a holiday in the US will bring calmer trading.
| Currences | change | |
| EUR/CZK | 25.90 | 0.2% |
| EUR/HUF | 271.2 | 0.1% |
| EUR/PLN | 4.280 | 0.7% |
| USD/PLN | 2.920 | 2.2% |
| EUR/USD | 1.469 | -0.3% |
| USD/JPY | 90.2 | 1.1% |
| Bonds 2Y | change | |
| Czech Rep. | 2.35 | 0.09 |
| Hungary 3Y | 7.32 | -0.02 |
| Poland | 5.22 | 0.08 |
| Slovakia | 1.90 | 0.10 |
| Eurozone | 1.38 | 0.08 |
| USA | 0.97 | 0.05 |
| Bonds 10Y | change | |
| Czech Rep. | 4.50 | -0.28 |
| Hungary | 7.95 | 0.01 |
| Poland | 6.22 | 0.00 |
| Slovakia | 4.54 | 0.15 |
| Eurozone | 3.22 | 0.05 |
| USA | 3.39 | 0.12 |
Hungary
The Hungarian forint finished the week in a stable mood around the 271.00 level. Fears from devaluation in Latvia eased after the Prime Minister said that they are close to an agreement with international institutions about further measures. The Prime Minister’s road show in London could have also helped a bit as he is emphasizing the fiscal consolidation measures that have been taken by the government and their positive impact on establishing a sustainable path.
The Hungarian fixed income did not change much after yesterday’s rally. The money market had a bit of a relief with the currency and interest rates lowered by about 5bps, but the longer-dated FRA instruments are still above the 6.00% level. The 5y5y forward IRS spread also compressed slightly to 207bps from 220bps, thus the threat of a prolonged correction has now become muted.
Poland
On Friday, the Polish zloty continued to lose ground despite generally positive sentiment in risky markets. The Polish currency was, however, probably negatively affected by rumors about a possible devaluation in Latvia. The market shrugs off the positive information that the MIFin was easily able to sell (privately) eurobonds worth of EUR 910bn.
Today, the eye-catcher will be the September C/A figures. Probably because of very positive readings in previous month the market expects a surplus, which might be a too optimistic assumption. So, the market might be temporary disappointed, if the September figures shows a deficit. On the other hand, it will be a tragedy, since the Polish C/A has been behaving quite well this year.
