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Central European Weekly

Polish Industrial Production Figures Will Show Further weakness

Mon, Mar 16 2009, 13:21 GMT
by KBC Market Research Desk

KBC Bank  |  View company's profile


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Czech Republic

Falling demand in Western Europe is driving the Czech economy into recession.


Hungary

A rally drives the currency higher and yields roughly 100bps lower


Poland

Higher inflation is not going to prevent interest rates from going lower


The Week Ahead

Polish Industrial Production Figures Will Show Further weakness


Overview

Hungarian and Polish households cheer SNB policy

An event that may have a fundamental effect on the Hungarian and Polish currencies and economies took place, but this time it was not in Central Europe, the euro area, or the United States, but in Switzerland. The Swiss National Bank not only cut official interest rates, but it also made clear that, given the deflation threat, it is going to intervene and weaken the franc. Why is it so important for the Hungarian and Polish markets and economies?

In recent years, Hungarian as well as Polish households have been charmed by Switzerland’s low interest rates, so much so that, notwithstanding the exchange rate risks, they did not hesitate to incur large debts in the Swiss currency. However, the escalation of the financial crisis involved not only the depreciation of the forint and the zloty, but also the appreciation of the franc. Naturally, this was a fatal combination for Hungarian and Polish borrowers indebted in the Swiss currency. Hungary and Poland thus welcomed the Swiss National Bank’s move so heartily, while the other developed countries may only accept it with grinding teeth. The unilaterally motivated steps by the Swiss central bank will not be accepted with understanding in the euro area in particular, where the monetary policy encouraged by the currency depreciation against the euro will be viewed as a competitive devaluation in terms of a ‘beggar your neighbour’ policy. Nevertheless, this problem won’t bother Hungarian and Polish households, whose mortgage and consumer loan payments had increased significantly with the strengthening franc.

Published on  Mon, Mar 16 2009, 13:24 GMT


KBC Bank http://www.kbc.be/dealingroom | piet.lammens@kbc.be

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Legal disclaimer and risk disclosure

This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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Yesterday, the Polish labour market data was published by Danske Bank A/S
Wed, Mar 17 2010, 06:27 GMT

US Industrial production unexpectedly rose in February by Union Bank of California
Wed, Mar 17 2010, 05:53 GMT

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Factory Production Declined, Weather May Have Played a Role by Northern Trust
Mon, Mar 15 2010, 23:20 GMT

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