Headlines
Currencies: CEE currencies weaken in thin trading conditions
Fixed Income: Polish labour market data in focus
Czech Republic
The Czech koruna starts to trade again on the domestic forex market after a national holiday held yesterday. The domestic eco calendar is empty today and therefore the EUR/CZK pair needs to look other markets, particularly to regional forex and core equity markets. Still, we believe that there is a scope for further appreciation of the koruna after the latest central bank meeting, which brought stable official rates at least until the upcoming December.
Even more quite trading might resume on the Czech fixed income market, which will hardly find any stimuli at home. The only exception could be the domestic forex market, which might trigger further steepening of the curve, if the koruna gains on the back of the bullish sentiment in merging markets.
| Currencies | change | |
| EUR/CZK | 25.46 | -0.10% |
| EUR/HUF | 265.1 | -0.30% |
| EUR/PLN | 4.091 | -0.10% |
| USD/PLN | 2.75 | 1.10% |
| EUR/USD | 1.49 | -0.30% |
| USD/JPY | 89.3 | 0.50% |
Poland
Polish zloty stepped back in light of a weaker start of US equities on Tuesday. The pair moved above 4.10 EUR/PLN, but the negative sentiment waned out as global equity markets stabilized later during the session.
Today the labour market data are on the calendar. We do not expect any encouraging signals. Employment should continue to decline and wage dynamics keep moderating. The negative labour market trends may intensify by the end of the year when positive seasonal factors diminish. This should limit private consumption, which helped the largest central European economy to escape the negative growth so far. Nevertheless these trends are widely expected and should not bring major surprise to the market. Our view is that the mid-term outlook still remains pretty positive compared with rest of the Europe. That is why we keep a bullish mid-term stance. Short term volatility on the other hand clearly depends on the sentiment on global equity markets, which eyes US inflation and housing starts today.
| Bonds 2Y | change | |
| Czech Rep. | 2.09 | 0 |
| Hungary 3Y | 6.99 | -0.06 |
| Poland | 5.13 | 0.09 |
| Slovakia | 2.52 | 0.02 |
| Eurozone | 1.19 | 0.01 |
| USA | 0.77 | -0.01 |
| Bonds 10Y | change | |
| Czech Rep. | 4.27 | 0.06 |
| Hungary | 7.42 | -0.08 |
| Poland | 6.15 | 0.03 |
| Slovakia | 4.23 | -0.01 |
| Eurozone | 3.3 | -0.01 |
| USA | 3.34 | -0.02 |
Hungary
Stronger dollar triggered temporary setback for the Hungarian forint as usual, but overnight trading brought a quick recovery to the market. The pair moved in a 1% range between 265.00 and 267.00 during the day and could continue to test the key 265.00 level today. Historical experience suggests that the currency weakens around the central bank’s rate decision, hence the risk is probably for weakness in the coming days.
The Hungarian fixed income market rallied with the stabilizing currency and yields decreased about 10bps. The short-end is now getting closer to the 6.10% level as the market has discounted in the probability of a 5.5% base rate scenario. The longend also advanced, but forward spreads remained unchanged suggesting that core markets and rate cut expectations are moving the market instead of better convergence prospects.
