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Tide is turning
Fri, Aug 8 2008, 15:05 GMT
by Danske Research Team
Yesterday the Czech central bank (CNB) cut its key pol-icy rate by 25bp to 3.50%. Why? The CNB has been unhappy about what it sees as excessive strengthening of the Czech koruna. Quickly following in the footsteps of his Czech colleagues, Polish central bank governor Skrzypek yesterday said in an interview on Polish TV that strong zloty was hurting the economy.
At the same time as CEE central bankers are airing their worries about the strength of their currencies we have seen a strong downward move in EUR/USD on the back of a less hawkish ECB and a stream of numbers indicating a significant slowdown in European growth. Negative euro sentiment often has a direct negative impact on CEE currencies.
Furthermore, signs that the European slowdown is spreading to CEE are quite clear, for example, weak in-dustrial production numbers out of the Czech Republic and Hungary this week.
The news flow - dovish centrals, a potential turnaround in EUR/USD and weak data out of CEE - is negative for Central and Eastern European currencies, all of which have weakened significantly in recent days. We expect the weakening of the CEE currencies to continue in the coming months - the tide has turned.
Published on Fri, Aug 8 2008, 15:09 GMT
Archive
- The Russian central bank treads a dangerous path
Published On Fri, Nov 28 2008, 16:27 GMT - Rating cycle turning decisively negative
Published On Fri, Nov 21 2008, 13:56 GMT - The zloty's surprising demise
Published On Fri, Nov 14 2008, 15:59 GMT - Sharp drop in inflation equals lower rates
Published On Fri, Nov 7 2008, 15:24 GMT - A challenge for EU cooperation
Published On Fri, Oct 31 2008, 15:30 GMT
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