Headlines
Currencies: CE currencies slightly higher as risk aversion recedes
Fixed Income: Czech bonds get bullish signal as inflation surprises on the downside
Czech Republic
The Czech koruna finished yesterday’s session slightly weaker as domestic data flows (worse-than-expected unemployment and foreign trade figures) slightly disappointed while sentiment in emerging markets has been still mixed. Hence, the EUR/CZK pair moved back above the 26.15 level.
The domestic calendar contains a release of the January CPI report. Inflation readings have been much lower-than-expected, which will not be a good signal for the koruna, because it might postpone any signals that the central bank will need to tighten domestic monetary policy. On the other hand slightly better sentiment in emerging market’s universe could deliver some short-lived gains for the koruna.
Czech bonds eased at the beginning of the week despite poor January’s employment figures (the unemployment rate reached the cyclical high 9.8 %). The price action could be explained partly by developments in core markets and maybe by some prepositioning ahead of an upcoming auction held on Wednesday.
Today’s session has begun with a release of the January inflation reading, which were much lower-than-expected (year-on-year CPI was just 1.2 %, while the consensus looked for a 1.5% figure). This is a second strong bullish signal for the Czech bonds in two days, so we might expect some gains, which could be visible particularly at the front end of the curve.
| Currencies | change | |
| EUR/CZK | 26.15 | 0.3% |
| EUR/HUF | 273.0 | -0.1% |
| EUR/PLN | 4.083 | 0.1% |
| USD/PLN | 2.968 | -0.9% |
| EUR/USD | 1.372 | 0.3% |
| USD/JPY | 89.6 | 0.2% |
| Bonds 2Y | change | |
| Czech Rep. | 1.62 | -0.15 |
| Hungary 3Y | 7.31 | -0.04 |
| Poland | 5.02 | -0.04 |
| Slovakia | 2.21 | 0.09 |
| Eurozone | 1.01 | 0.00 |
| USA | 0.79 | 0.00 |
| Bonds 10Y | change | |
| Czech Rep. | 4.54 | 0.03 |
| Hungary | 8.12 | -0.05 |
| Poland | 6.14 | -0.03 |
| Slovakia | 4.13 | -0.02 |
| Eurozone | 3.15 | 0.02 |
| USA | 3.59 | 0.00 |
Hungary
After last week’s turbulence period, the Hungarian forint began this week in a more quiet mode and traded within the narrow range of 273.00 and 274.00. The pair opened a little stronger this morning at 272.70 in line with the improving global sentiment and risk appetite. If fears continue to ease there may be a greater chance for further forint appreciation, but the 272.00 level could act as a barrier.
The Hungarian fixed income had a generally stable day too, as both buyers and sellers were active. Some think that risks about Greece are probably overdone and thus cheaper bonds in Hungary create opportunities, while others fears that risks could materialize later and decide on reducing positions.
Poland
The Polish zloty stayed in defensive mode on Monday. The pair reflected prevailing sovereign risk in EU and moved above 4.10 EUR/PLN. Also the comments from polish policymakers did not help much. Polish Finance Minister Jacek Rostowski said that he saw no reason for further zloty strengthening. Separately Deputy Prime Minister Waldemar Pawlak told journalists that a rapid appreciation of the unit could hurt exports and dent the pace of recovery.
We may see another calm session today as both the domestic and global scene is pretty uneventful. Nevertheless we expect the emerging market sentiment to remain shaky in the light of sovereign woes and the zloty to remain vulnerable to further short term losses.
