Headlines
Currencies: CE currencies benefit from less political uncertainty in Romania
Fixed Income: Poland and Czech Republic on track for a budget deficit of 6 % of GDP
Czech Republic
The Czech koruna firmed slightly from the EUR/CZK 25.900 level to 25.800. Lower risk aversion in Eastern Europe was the main reason not only for koruna's gains but the koruna should also erase losses against other regional currencies, which had been accumulated in previous days. In spite of another decline of producer prices which underlined the rate cute hopes, the koruna reached the level of 25.755. Only the evening off-shore trading sent the koruna back.
There are no economic data in the Czech Republic today. Hence, the koruna can slightly profit again from the positive sentiment in core markets. May be, the market could be satisfied with today’s comment from Czech PM Fischer, who has said that the budget deficit should reach 6.5 % of GDP, which basically in line with overall expectations.
| Currences | change | |
| EUR/CZK | 25.85 | -0.2% |
| EUR/HUF | 267.7 | 0.3% |
| EUR/PLN | 4.211 | 0.2% |
| USD/PLN | 2.817 | 0.2% |
| EUR/USD | 1.490 | -0.3% |
| USD/JPY | 90.9 | 1.6% |
| Bonds 2Y | change | |
| Czech Rep. | 2.07 | -0.05 |
| Hungary 3Y | 7.11 | -0.09 |
| Poland | 5.01 | -0.02 |
| Slovakia | 1.80 | 0.13 |
| Eurozone | 1.43 | 0.06 |
| USA | 0.96 | 0.03 |
| Bonds 10Y | change | |
| Czech Rep. | 4.34 | -0.06 |
| Hungary | 7.50 | -0.20 |
| Poland | 6.14 | -0.04 |
| Slovakia | 4.47 | 0.03 |
| Eurozone | 3.31 | 0.04 |
| USA | 3.46 | 0.03 |
Hungary
The Hungarian forint remained in the previous day’s range of 267.00 and 268.00 as neither domestic nor foreign news brought any surprise to the market. There was a bit of a weakening sense in the afternoon after players become more cautious about the carry-trade with the rise of core market yields. Overnight news about fears from central bank intervention in South Korea had some contagion effect on some emerging market currencies, but the forint has so far been able to avoid a bigger correction.
Monetary Council member Mr Csaky said yesterday that there is ample room for rate cuts given positive inflation data from September and the strong currency. This could reinforce expectations for another 50bps rate cut on Monday, while the FRA market remained stable at 6.00% above the 4-months tenor.
The Hungarian fixed income market rallied a bit further yesterday as the 1-year Tbill auction showed considerable interest with a b/c ratio of 3. The cut-off interest rate level dropped to 6.51% reflecting views about a prolonged easing cycle. The longend has also advanced further by about 10bps and the 10-year yield got close to 7.25%, roughly 50bps lower then a week-ago.
Poland
The Polish zloty benefited from a more stable environment in Eastern Europe and positive earnings results in the US and firmed yesterday. Recall that political uncertainty in Romania and threat of negative contagion eased as the President nominated a market-friendly central bank economic adviser and economist Croitoru as Prime Minister. As a result the EUR/PLN pair even dipped temporary below the 4.20 mark. The market shrugged off the September budget data, which allowed the MinFin to declare that the 2009 budget deficit should be at around 6 % of GDP (in ESA95 standards).
Today, the calendar contains important wage and employment data for September. Though these might be important for the bond market, we doubt they can deliver a serious impetus for the price action in the forex market
