Headlines

Currencies: Czech koruna hits 5-month high


Czech Republic

The Czech koruna slightly extended its gains yesterday. The currency pair even attacked the EUR/CZK 25.25 mark and set a fresh 5-month high. The koruna had lagged behind other Central European currencies last month. So, some catching-up on the rally of other regional currencies might be the most important driver for the movement as there were no important domestic events.

The rest of the week might pass in a quite mode as there are no important events on the calendar in the Czech Republic or in core markets.

Currencieschange
EUR/CZK25.36-0.2%
EUR/HUF262.70.3%
EUR/PLN3.8750.1%
USD/PLN2.8170.0%
EUR/USD1.362-0.4%
USD/JPY90.50.4%

Bonds 2Ychange
Czech Rep.1.510.21
Hungary 3Y6.32-0.07
Poland4.740.04
Slovakia2.070.04
Eurozone0.900.05
USA0.960.05

Bonds 10Ychange
Czech Rep.4.15-0.03
Hungary7.30-0.10
Poland5.620.07
Slovakia4.07-0.03
Eurozone3.140.03
USA3.680.05


Hungary

Yesterday the forint corrected part of its previous gains. After reaching a new top against the euro in the morning, EUR/HUF closed the day at 262.10. As the domestic scene was empty the forint decline can be attributed to profit taking, nervousness on global markets, the movement of the zloty and also very likely to expectations that the central bank could cut rates again.

The MinFin presented a fresh estimate on the development of the budget deficit. The Minister expects that, after reaching 40% of its annual planned volume in February, the deficit will reach 75% at the end of April. As the expenditure side prevails at the beginning of the year, the ministry is however confident that the annual plan might be maintained.
Today, wage data for February surprised by its strong growth (6.5% y/y). However, we expect a quiet trading around current levels as higher wage growth could be just a one-month event and it should not be a market mover.


Poland

The Polish zloty returned part of its gains in light trading yesterday. The only domestic news was a release of the NBP Minutes from the latest MPC meeting in late February. The minutes showed that the MPC is still divided in its opinion, whether to change its bias of the monetary policy toward a tightening mode. We believe that such a change could happen in the second quarter of this year, while a first hike should come in the second half. This should widen the rate differential between Polish rates and rates in core markets, which should be a medium-term bullish factor for the zloty.