Headlines
Currencies: Polish Zloty should ignore weaker retail sales
Fixed Income: NBP to remain in a wait and see mode
Czech Republic
The Czech koruna decoupled from the zloty and the forint and eased above the 26.0 level against the euro. There were no (domestic) events, which would declare the price action. The only explanation of the koruna decoupling could be that some big institutional or corporate clients decided to buy a larger amount of euros and this decision influenced the whole market. We do no see much reason, why the koruna should underperform the rest of the CE region, so it should try to erase the losses against the forint or the zloty, which have been accumulated in recent days.
The Czech yield curve steepened in soft trading yesterday. The market activity is really decreasing these days as it seems that portfolio managers have become less active ahead the last month of the year. Moreover local banks will rather focus on the beginning of the next year as bond supply will become heavy again and it will make trading more volatile.
| Currencies | change | |
| EUR/CZK | 25.97 | 0.1% |
| EUR/HUF | 267.4 | -0.5% |
| EUR/PLN | 4.098 | -0.7% |
| USD/PLN | 2.737 | -0.5% |
| EUR/USD | 1.501 | 0.7% |
| USD/JPY | 88.5 | -0.2% |
| Bonds 2Y | change | |
| Czech Rep. | 2.09 | -0.02 |
| Hungary 3Y | 7.12 | -0.03 |
| Poland | 5.06 | -0.04 |
| Slovakia | 2.54 | -0.06 |
| Eurozone | 1.34 | 0.01 |
| USA | 0.75 | -0.03 |
| Bonds 10Y | change | |
| Czech Rep. | 4.20 | -0.01 |
| Hungary | 7.60 | -0.03 |
| Poland | 6.16 | -0.01 |
| Slovakia | 4.42 | 0.19 |
| Eurozone | 3.26 | 0.01 |
| USA | 3.32 | -0.02 |
Hungary
The Hungarian forint had a quiet day between the levels of 267.50 and 268.50 on Tuesday. Good performance of the US equity markets overnight however helped the forint to strengthen some 0.5% to 267.00 by early this morning.
Despite concerns from central bankers about asset-price bubbles due to low financing environment, emerging market currencies have so far been able to perform well. As long as this theme goes, the forint may continue to follow the others, but we would be increasingly cautious about the sustainability of the carry-trade positioning in light of possible steps from core central banks that would tighten the current abundant liquidity.
The Hungarian fixed income market gained a bit with the stronger currency. Strong demand at the 3-month T-Bill auction pushed down yields at the shorter-end by 10-15bps and yields got close to the key 6.00% level here. The FRA market did not change much, thus the T-Bill performance could be mainly attributed to the higher demand.
Poland
The Polish zloty withstood without any serious trouble the initial weakness of the US equity markets. It could have been due to the positive surprise from German Ifo sentiment. The pair stayed more or less flat around 4.12 EUR/PLN.Today, we might see weaker retail sales as a result of some ongoing weakening of the labour market. although at much slower pace than we had expected. The NBP meeting should not bring any major surprise beside the obligatory no-change verdict. We believe the board can be quite comfortable with its neutral mode stance for now. Hence that attention of the zloty should be on US durables and the global sentiment ahead of Thanksgiving and the kick-off of the US Christmas shopping season.me.
