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CE currencies rebound as pressure on Greece eases
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Currencies: CE currencies rebound as pressure on Greece eases
Czech Republic
The Czech koruna firmed slightly as pressure on Greece (and Portugal) eased finally yesterday. The mildly positive price action for the koruna was primarily a result of foreign events, rather than the fact that the Czech MinFin upgraded its forecast for the growth of the Czech economy for this and next year (from 1.3 % to 1.5 % in 2010 and 2.4 % to 2.6 in 2011 respectively).
Today, the domestic calendar is empty again, so the koruna will continue to watch developments surrounding Greece and other PIIGS, but the US data (particularly the GDP figure) could be interesting too. More surprises on the upside from the US figures could help the koruna to recoup its previous losses.
| Currencies | change | |
| EUR/CZK | 25.48 | -0.4% |
| EUR/HUF | 266.2 | -1.2% |
| EUR/PLN | 3.904 | -0.5% |
| USD/PLN | 2.936 | -1.0% |
| EUR/USD | 1.330 | 0.8% |
| USD/JPY | 94.2 | 0.1% |
Hungary
The Hungarian forint appreciated sharply due to a relief rally after expectations that the Greek rescue package was coming closer. The pair soared to the key level of 266.00 from opening levels of 269.00.
PM designate Mr Orban said that the PM office will shrink considerably and will be headed by former Finance Minister Mr Varga, which could mean that fiscal policy will be under close supervision by the PM. He also said that tax cuts will take place on July 1 and an agreement with the IMF should be achieved before end-August.
We think there is a major risk that the this year’s budget deficit will be way higher than the consensus estimate of 5.0%, which could be announced in June. This would weaken the forint considerably and therefore we recommend to reduce forint positions over the coming weeks.
The Hungarian fixed income market had a relief with the currency and yields dropped about 10bps. The 12-month T-Bill auction saw decent demand and the cutoff rate was tad below the key 5.00% level at 4.96%. However, long-end forward spread failed to shrink further from 220bps (5y5y), hence the market may be at odds on whether the Hungarian story has remained compelling or not.
| Bonds 2Y | change | |
| Czech Rep. | 1.78 | 0.00 |
| Hungary 3Y | 5.68 | -0.03 |
| Poland | 4.61 | -0.09 |
| Slovakia | 1.95 | 0.02 |
| Eurozone | 0.81 | 0.04 |
| USA | 1.00 | -0.03 |
| Bonds 10Y | change | |
| Czech Rep. | 4.07 | 0.00 |
| Hungary | 6.88 | -0.02 |
| Poland | 5.66 | -0.07 |
| Slovakia | 4.00 | 0.06 |
| Eurozone | 3.01 | 0.02 |
| USA | 3.74 | -0.01 |
Poland
The Polish zloty led the regional rebound on signs the EU/IMF support package for Greece is coming closer and the Greek government seems to agree on further austerity measures. As a result, both European and US equity markets posted gains for a second day in a row. Hence the pair came back to the 3.90 EUR/PLN.
We continue to be somewhat suspicious regarding trading ahead of the weekend. The domestic data calendar is empty, but nervousness before all the euro zone members approve the bailout plan may persist. Hence we do not bet on further gains ahead of weekend and see the pair trading in a tighter range.
Published on Fri, Apr 30 2010, 08:40 GMT