KBC Market Research Desk
KBC Bank
On Thursday, the zloty and the forint drew further support from Fed's decision to keep interest rates unchanged. The forint strengthened sharply, hitting a sixteen month high against the euro. Two recent positive news - last week's S&P surprising decision to improve the Hungarian rating and the stable US rates – obviously made some investors so far betting on forint's decline change their mind.
Regardless recent gains, the room for further significant appreciation of the forint and the zloty in the weeks ahead appears limited. Minutes from the last meeting of the National Bank of Poland (released yesterday) mention running debate about a possible rate cut. According to the minutes, "certain Council members suggested that the interest rate cut could be justified already in the following few quarters". For the time being, the call for a rate cut has been weak (identical quote could be found in the previous minutes, too) and we therefore keep our outlook (for stable rates) unchanged. On the other hand, comments like this can put a cap on zloty´s exchange rate. Technically, the next support levels have been seen at EUR/PLN 4.26 and 4.23 (2016 high).
A similar scenario holds also for Hungary; further gains of the forint would likely spur central bankers to consider additional rate cuts (which are, in fact, to some extent already anticipated).
| Currencies | % chng | |
| EUR/CZK | 27.00 | -0.1 |
| EUR/HUF | 305.9 | -0.7 |
| EUR/PLN | 4.28 | -0.2 |
| EUR/USD | 1.12 | 0.2 |
| EUR/CHF | 1.09 | -0.3 |
| FRA 3x6 | % | bps chng |
| CZK | 0.28 | 0 |
| HUF | 0.69 | -3 |
| PLN | 1.72 | 2 |
| EUR | -0.31 | 1 |
| GB | % | bps chng |
| Czech Rep. 10Y | 0.28 | -1 |
| Hungary 10Y | 2.82 | -5 |
| Poland 10Y | 2.77 | -9 |
| Slovakia 10Y | 0.36 | -7 |
| CDS 5Y | % | bps chng |
| Czech Rep. | 39 | -4 |
| Hungary | 122 | -2 |
| Poland | 76 | 0 |
| Slovakia | 42 | -2 |
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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