Headlines
Currencies: Forint is holding its gains ahead of the MNB interest-rate setting meeting
Fixed Income: MNB is going to cut again – probably by 50 bps
Czech Republic
On Friday the Czech koruna strengthened up to EUR/CZK 25.705 by both the Prime Minister's announcement that the year’s deficit could reach 6.5% of GDP, i.e. slightly less than the Ministry of Finance had predicted, and lower aversion to risky assets. However, the trend reversed in the afternoon. Weaker-than-expected profits of key U.S. giants returned the currency pair back to the morning values. Hence, the koruna against the euro closed the week at 25.850.
Today, due to the absence of domestic statistics, the koruna may start on a quiet note around Friday’s levels. Nevertheless, the currency pair EUR/CZK be could affected both by the price action of the Hungarian forint (after the MNB meeting) and latter on the ongoing U.S. earnings season.
| Currences | change | |
| EUR/CZK | 25.85 | 0.00% |
| EUR/HUF | 266.8 | -0.30% |
| EUR/PLN | 4.208 | -0.10% |
| USD/PLN | 2.817 | 0.00% |
| EUR/USD | 1.491 | 0.00% |
| USD/JPY | 90.9 | 0.00% |
| Bonds 2Y | change | |
| Czech Rep. | 2.11 | 0.04 |
| Hungary 3Y | 7.11 | 0 |
| Poland | 5.01 | 0 |
| Slovakia | 1.65 | -0.15 |
| Eurozone | 1.44 | 0.01 |
| USA | 0.98 | 0.02 |
| Bonds 10Y | change | |
| Czech Rep. | 4.46 | 0.12 |
| Hungary | 7.57 | 0.07 |
| Poland | 6.14 | 0 |
| Slovakia | 4.48 | 0.01 |
| Eurozone | 3.29 | -0.02 |
| USA | 3.41 | -0.05 |
Hungary
The Hungarian forint finished the week in a calm mode at the EUR/HUF 267.00 level and opened there this Monday before the central bank rate decision at 14:00CET. The market has a wide consensus for another 50bp cut, which would bring down the base rate from 7.50% to 7.00% and could leave the currency unchanged.
It could be interesting to see the press conference and the statement after the decision as it will reveal whether the central bank has changed its view on the outlook.
The Hungarian fixed income market closed the week unchanged and yields remained at 6.50% at the shorter-end and at 7.30% at the longer-end. The FRA market did not change its outlook, which sees the bottom of the easing cycle at 6.00% in 4- or 5-months time.
Poland
The Polish zloty eased a bit in Friday, while the price action was not significant. The domestic macro figures – the September gross wages and employment reports - came out in line with expectations. Hence the EUR/PLN pair had no reason (from domestic point of view) to move either way.
Today, the domestic eye-catcher might be the September industrial production data (the market expects quite a strong month-on-month growth). Beside these important domestic figures, the zloty might watch the forint development after an expected rate cut of the MNB.
