Headlines
Currencies: EUR/CZK pair tests the 26.0 resistance
Fixed Income: Bond auctions in Czech Republic and Poland met strong demand
Czech Republic
The Czech koruna eased slightly yesterday, but faced more losses this morning as the EUR/CZK is currently testing the 26.0 figure. There were no events, which would declare the negative price action. Still, clearly the koruna underperforms the forint and the zloty, which were able to gain significantly in previous days.
Interestingly, the koruna’s poor performance is coupled with a nice rally in the domestic bond market. This was confirmed in yesterday’s two successful auctions. First, the MinFin easily sold CHF 500m bond with 7Y maturity. Secondly, there was another 3- year bond tranche with a variable rate. As expected it initiated a solid demand. The demand exceeded the offer 3.04 times, during the previous tranche it was 2.29 times, and it enabled the Ministry to increase the sales volume from originally planned CZK 5B to CZK 5.13B.
| Currences | change | |
| EUR/CZK | 25.98 | 0.6% |
| EUR/HUF | 266.3 | 0.6% |
| EUR/PLN | 4.183 | 0.4% |
| USD/PLN | 2.792 | -0.5% |
| EUR/USD | 1.497 | 0.2% |
| USD/JPY | 91.5 | 0.9% |
| Bonds 2Y | change | |
| Czech Rep. | 2.13 | 0.15 |
| Hungary 3Y | 7.01 | -0.02 |
| Poland | 4.98 | 0.02 |
| Slovakia | 1.67 | -0.12 |
| Eurozone | 1.40 | 0.01 |
| USA | 0.96 | 0.04 |
| Bonds 10Y | change | |
| Czech Rep. | 4.12 | -0.04 |
| Hungary | 7.35 | -0.01 |
| Poland | 6.12 | 0.05 |
| Slovakia | 4.51 | 0.08 |
| Eurozone | 3.30 | 0.05 |
| USA | 3.41 | 0.07 |
Hungary
The Hungarian forint had a sharp turnaround on Wednesday as the global equity market sentiment became sourer. The pair tested this year’s high of 263.70 again and overnight trading saw it as high as 263.00 for one trade, but daytime activity brought it back to the 264.00-265.00 range. This morning the Hungarian forint weakened further to 266.00, so for now a new weakening trend seems to have been building ground.
Today’s retail trade data came out below consensus at -7.2% Y/Y as households are
cutting back on consumption amid the recession.
The Hungarian fixed income market had a quiet day after the sharp rally before, but today’s bond auctions could be an important event for the market. AKK will offer Ft60-70bn of 3-, 5- and 10-year papers again and this may test the market’s appetite for bonds at the current low yield levels.
Poland
The EUR/PLN pair was only little changed yesterday. Hence, the Zloty was unable to capitalize from weaker dollar and well bided government bond auction. So, the EUR/PLN 4.15 support level has remained unbroken and the pair bounced back this morning as the market could read mixed comments from deputy of Finace Minister Kotecky, who said he expected the budge deficit between 6 to 7% of GDP and public debt above 55 % of GDP level.
Today, the only domestic event is a release of GDP figures for the second quarter of this year, which should not be a market mover. So, we think the zloty will particularly watch the forint, which has been a leader among CE currencies in recent days.
