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Central European Weekly
3
0
Hungarian and Polish inflation figures in the spotlight
Mon, Oct 12 2009, 12:58 GMT
by KBC Market Research Desk
Czech Republic
EUR/CZK almost tested the 26 level as CNB threatens with interventions
Hungary
While foreign trade is in huge surplus, government bond auctions are very bid
Poland
Zloty weakens as it faces contagion from Romania and Latvia
The Week Ahead
Hungarian and Polish inflation figures in the spotlight
Overview
CNB on its was to ‘quantitative easing’
The Czech National Bank has started to prepare its ‘artillery’ ahead of the November meeting of the CNB Board, when a new inflation forecast will be discussed. The aggressively dovish statements made by two important members of the Board, spiced up by verbal interventions against the koruna, and other (anti-inflationary) arguments, have made us change our outlook for CNB rates and the Czech koruna.
Thus we expect the CNB Board to cut its repo rate, by 25 basis points (to 1.0%), in early November. Nonetheless, even this might still not be the CNB Board’s last policy move. The Board may also consider other options that might lead to an easing of monetary conditions in the Czech Republic – and they may not necessarily be limited to an explicit go-ahead for forex interventions against the koruna. The CNB might decide to purchase government bonds on the secondary market, in order to cut market interest rates (i.e., to reduce the relevant risk premiums). Naturally, all of this will boost Czech bonds, which are likely to see several very strong sessions.
On the other hand, the koruna is unlikely to respond positively to the switch to the Czech variant of Quantitative Easing. Bear in mind that interventions against the koruna are clearly the most likely instrument that the Czech National Bank might use in its Quantitative Easing policy.
What is the level where the CNB may intervene against the koruna? For the next few months, we see the ‘CNB’s pain threshold’ at around the EUR/CZK 25.0 level – below this, a forex intervention may be imminent.
Published on Mon, Oct 12 2009, 13:06 GMT
Archive
- Polish industrial output in focus
Published On Mon, Nov 16 2009, 12:05 GMT - Polish inflation in the focus this week
Published On Mon, Nov 9 2009, 12:27 GMT - Polish central bank shifts to a neutral mode
Published On Mon, Nov 2 2009, 12:50 GMT - Surprisingly strong industrial output helps the zloty
Published On Mon, Oct 26 2009, 13:41 GMT - EUR/PLN still hovers around the 4.2 figure
Published On Mon, Oct 19 2009, 10:39 GMT
KBC Bank
| Havenlaan 12, 1080 Brussels
http://www.kbc.be/dealingroom | piet.lammens@kbc.be
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.Related reports
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