Czech Republic
CNB on hold as expected, as it adaopts a wait-and-see stance
Hungary
The bond market faced a sharp sell-off
Poland
The zloty only slightly affected by negative contagion
The Week Ahead
Czech GDP should record growth for the third quarter in row
Overview
Is Central Europe Set for a Negative Correction?
Finally, Central Europe after all felt the negative impact of the increases in the risk premiums on government debts in the euro area. Even so, the depreciation – of both currencies and bonds – was only limited and temporary. Above all, the Polish zloty, which was able to hit this year’s new highs and traded under the psychological level of EUR/PLN 4.0, demonstrated its strength and resistance to the increasing aversion to risk. We would like to add that the excellent fundamentals of the Polish economy really predestine the zloty to continue to appreciate. Any negative correction needs be viewed as a temporarily and, we believe, should be used for the reactivation of zloty long positions.
Perhaps, such an opportunity is arising right at the moment. The market concern about the fiscal development of the vulnerable members of the euro area has not yet receded, and this, in combination with some of the mixed statistics from the global economy, may lead to a stronger correction on emerging markets as well as in Central Europe. For example, Polish and Hungarian bonds, which still bear fairly high yields, have been in the black since the beginning of the year. We could hardly imagine that the Hungarian or Polish bond markets could maintain this year’s gains if the sales of the government bonds of the peripheral countries of the eurozone persist.
