KBC Market Research Desk
KBC Bank
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As situation in Ukraine escalates, regional currencies still remain under modest downward pressure
As the conflict gradually escalates in eastern Ukraine, currencies in Central Europe feel less comfortable. In this respect it is worth noting that Foreign Ministers of the EU, US, Russia and Ukraine meet today in Geneva to discuss the crisis in Ukraine. Expectations are however low as both the EU and US are preparing broader sanctions in case the talks fail, while in the meantime there have been more deadly clashes reported from the eastern Ukraine today.
The negative impact of the conflict in Ukraine is particularly visible in the case of the Polish zloty, which has been weakening since the beginning of April. It’s quite surprising that the modest downward pressure on regional currencies has been coming in a parallel with growing speculation that the ECB will start its QE programme during this spring (which should be potentially bullish for CE currencies).
Today, while situation in Ukraine will continue to grab the attention of regional markets, investors might also look at Polish macro figures - core inflation and industrial production data for March are going to be released. Moreover, the NBP will release its Minutes from the latest meeting.
As concerns the industrial output we think that there is a good chance there will be a quite positive outcome, because manufacturing led by strong gains in the automotive sector has been recently pushing the production up in the whole region.
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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