Headlines
Currencies: Zloty eases temporary on lower CPI and postponement of privatization
Fixed Income: The Polish inflation came out flat month-on-month in September
Czech Republic
The Czech currency moved sideways in a narrow band 25.8-25.9 EUR/CZK yesterday. The koruna didn't benefit from the ongoing positive atmosphere towards risky assets because of another dovish comment from the Czech central bank. Vicegovernor Singer emphasised strong non-inflationary pressures in the economy and he mentioned again the possibility of a rate cut. On the other hand, these comments even extended the massive rally on the Czech bond market.
Today, a release of the September producer prices didn’t receive much attention (though the dip was deeper than expected at -0.4 month-on-month) and therefore the Czech currency will rather watch the core and regional markets only. Nevertheless the koruna can try to erase its losses against the Polish zloty and Hungarian forint and it can slightly firm.
| Currences | change | |
| EUR/CZK | 25.9 | -0.10% |
| EUR/HUF | 267 | -0.20% |
| EUR/PLN | 4.203 | -0.40% |
| USD/PLN | 2.81 | -1.00% |
| EUR/USD | 1.495 | 0.40% |
| USD/JPY | 89.4 | 0.30% |
| Bonds 2Y | change | |
| Czech Rep. | 2.12 | -0.16 |
| Hungary 3Y | 7.2 | -0.04 |
| Poland | 5.04 | -0.11 |
| Slovakia | 1.67 | -0.13 |
| Eurozone | 1.36 | 0.04 |
| USA | 0.93 | 0.01 |
| Bonds 10Y | change | |
| Czech Rep. | 4.41 | -0.07 |
| Hungary | 7.7 | -0.02 |
| Poland | 6.18 | 0.03 |
| Slovakia | 4.44 | -0.02 |
| Eurozone | 3.27 | 0.08 |
| USA | 3.43 | 0.09 |
Hungary
The Hungarian forint consolidated between the levels of 267.00 and 268.00 on Wednesday on the back of the positive equity market sentiment and renewed interest for Hungarian bonds. The market is thus getting close to this year’s record high level of 265.00 from early August, which could be a strong resistance level to break.
The central bank meeting could probably also slow down the appreciation trend of the currency as the market usually gets feared from a bigger rate cut around the decision due on Monday. The consensus’ and our view is for another 50bp cut to 7.00%, but since the central bank had once did 100bps in July, there is always some speculation for a bigger move.
The Hungarian fixed income continued it rally yesterday as local investors were buying the long-end in bigger sizes and some foreigners have also showed higher interest there. The reason behind could be the wide ASW spread at the long-end, which has narrowed to below 20bps at maturities below 3-year, but remained close to 100bps at the 10-year tenor. Yields declined about 10bps for longer-dated papers above 5-year and the market may continue to compress the ASW spread to pre-crisis levels of below 50bps.
Poland
Yesterday the Polish zloty could not significantly benefit from the bullish mood on global equity markets and closed the session almost unchanged. Its initial gains were erased in the afternoon after September’s inflation stagnated. The zloty might also be disappointed by the fact that Ministry of Finance postponed the sale of 67% assets of the third largest energy's operator ENEA after RWE, one of the major candidates, withdrew its offer.
Today, the zloty is primarily focused on foreign markets, where the event calendar is far more interesting. The Polish household budget balance in the competition with the U.S. 3q2009 company’s results and with PhillyFed sentiment can hardly succeed. Nevertheless, bullish sentiment on the stock markets could help the EUR/PLN currency pair to return back below 4.20.
