KBC Market Research Desk
KBC Bank
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Regional currencies give up previous gains as the Ukraine-Russia conflict weighed on sentiment
Small upward revisions of the Polish and Czech GDP growth in 2014Q2
Central European currencies gave up their previous gains as the Russo-Ukrainian conflict entered into the new phase after Russian troops had started to be more openly involved in fighting. An almost 2% depreciation of the Russian rouble brought contagion to regional forex markets. Yesterday’s losses of the forint, the zloty and the koruna remained below 1%, though.
Today, statistical offices have released details about and revisions of Czech and Polish GDP figures for the second quarter of 2014. Both headline figures were revised marginally upward (by 0.1 percentage point) from their preliminary releases. More important information came from the Polish report, which showed that the GDP was driven by domestic demand that grew by 5.1% y/y (mainly thank to fixed investments). The above figures just confirm our previous opinion that the NBP should be in a hurry with cutting its base rate, in other words, we keep our bet the MPC will ease its policy already on the upcoming meeting (next Wednesday).
On the other hand, the contribution of (net) foreign trade was negative as export growth slowed to 5.9% y/y. This was clearly a negative result of the ongoing Ukraine-Russia conflict. The fresh news that violence at the Russian/Ukraine boarder flared up is not a positive message for the Polish economy and indirectly for the zloty too.
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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